Nervous nellies overreacting to news headlines creates opportunities for those wanting to be a homegrown Warren Buffett in their lifetime.

The desire for the key drivers of stock prices and the overall share market to react short to even long term to news headlines creates opportunities for those wanting to be a homegrown Warren Buffett in their lifetime. The headline from the US finance website CNBC welcomed us this morning with this “Dow drops 600 points…”, while others talk about “bloodbaths” and other scary takes on Wall Street, as tech companies get dumped.

This is a rejection of the key driver of why US stocks have risen 87.08% in five years, that is Artificial Intelligence or AI, in the hands of the greatest tech companies on earth: the Magnificent Seven, which means Apple, Amazon, Alphabet (Google), Nvidia, Microsoft, Meta (Facebook) and Tesla.

However, the big question for an investor with the best stock player on the planet or Buffett aspirations is this: Is this sell-off short-term, creating a buying opportunity or is it the start of something bad?

This tech trauma that has seen the tech-heavy index — the Nasdaq — drop 3.65% in five days but over the month it’s down only 1.85%. However, locally, our hardly very tech market is down 6.23%, based on our ASX 200 index, which is an overreaction to the tech dumping in the US related to a belief that there has been an over-investment in AI-involved companies, such as the Magnificent 7 group.

But this difference in the magnitude of the Nasdaq and ASX 200 selloffs also shows there are often multiple forces at play that short-term market influencers and computer trading models can overreact to. For example, some of our stock dumping is due to the RBA’s decision not to cut interest rates as it worries about inflation, which is partly related to skyrocketing power bills, linked to our country’s ‘new age’ commitment to not using fossil fuels.

And in a related way, the news that our third largest customer for thermal coal, South Korea, has decided to phase out coal, led to the AFR’s Jessica Sier reporting “BHP, Whitehaven Coal, New Hope and Yancoal Australia falling between 2 per cent and 4 per cent in early trade.”

That’s a very short-term reaction to a decision that needs to come up with some additional information, that South Korea will do this phasing out between now and wait for it, 2040! While this means there’s still time to make money out of coal if you fancy it, it should also make you remember that coal will have replacements such as rare earths and lithium that go into batteries and hi-tech products. So, it pays to be informed, if you want to invest like Wazza, who’s also known as the Oracle of Omaha.

By the way, only last week, Ganfeng Lithium chairman Li Liangbin told an industry gathering that he thought the lithium price would rise 30% next year to $43,000 a tonne, which sent lithium share prices spiking. Those who were believers in the future of lithium batteries usage in a greener world and electric vehicles got richer on the news. (PLS was up 3% yesterday and 17% over the past week.)

One of the hallmarks of Buffett is to do the reading. He did this daily (and probably still does!), which gave him a competitive edge when it came to understanding the potential of a business and, ultimately, what its share price would do.

Doing the reading on the future of coal and what South Korea revealed at the COP30 climate summit in Brazil this week can be summed up with these key revelations:

1. All 62 South Korean coal plants will close by 2040.
2. If coal can be burnt and the carbon emissions can be captured and stored, new coal plants could emerge.
3. The decision wasn’t just supportive of fighting climate change, the government says it will “increase our energy security, boost the competitiveness of our businesses, and create thousands of jobs.”
4. According to Sier, South Korea “is the world’s seventh-largest coal power generation network and is the world’s fourth-largest thermal coal importer behind China, India and Japan”.
5. The country is set to import $2.3 billion worth of our coal this year.

Interestingly, only in September, our Treasury boffins told us that their calculations say that we should see a 50% fall in the value of Australia’s coal and gas exports over, wait for it, the next five years!

So, this South Korean announcement (which straddles 25 years to 2040) is the kind of change that the Treasury modelling would have anticipated. And surely, it’s a bigger and scarier revelation than this one about our Asian neighbour doing what most industry experts would have already expected.

Markets can be poorly informed and short-term overreactive and therefore can over-buy and over-sell stocks. And that can create money-making opportunities for the readers and thinkers about companies, the industries they’re in and the key information that will either pump up profits, as well as share prices, or not!

This is what Buffett has taught us. If you can’t see yourself doing that, it’s why some people seek out honest, intelligent advisers or go for smart fund managers or Exchange Traded Funds (ETFs) that have great track records.

If you can’t do the reading and the thinking, then find someone or some organisation to do it for you, which means you’ll be contracting out your Buffett aspirations. So, make sure whoever does this for you is trustworthy and with a great track record. It helps big time if they’re smart like Wazza!

By the way, tomorrow morning we’ll wake up to the news about how Nvidia has reported its recent trading. If it’s better than expected, these tech concerns will be put away for a time and stock prices and markets will rise. And yes, our market will rise, underlining how what players in the stock market do (i.e. selling or buying on a daily basis) often doesn’t mean all that much.