There’s no one playbook that gives you reliable guidelines to playing property and stock markets in the short term and winning. But they do exist for the long-term player. And the world’s greatest investor gives you the clues. Let me give you what I consider to be the best of Warren Buffett in a nutshell of wise quotes:
1. Be fearful when others are greedy and greedy when others are fearful.
2. You don’t need to be a rocket scientist. Investing is not a game where the guy with the 160 IQ beats the guy with 130 IQ.
3. Price is what you pay; value is what you get.
4. Risk comes from not knowing what you're doing.
5. It's far better to buy a wonderful company at a fair price than a fair company at a wonderful price.
6. It's better to hang out with people better than you. Pick out associates whose behaviour is better than yours and you'll drift in that direction.
7. Our favourite holding period is forever.
8. I sit in my office and read all day.
9. Only buy something that you’d be perfectly happy to hold if the market shut down for 10 years.
10. I always knew I’d be rich. I don’t think I doubted it for a minute.
I always remember in the depths of the GFC in 2008, Warren Buffett lent $5 billion to Goldman Sachs as an emergency loan. He made $3.7 billion on that play but he did so much to help build confidence in the idea that the US economy and great institutions like Goldman would survive and one day thrive.
It was gutsy but I recall Buffett’s thinking at the time, which he has referred to on other occasions and it’s captured in the following: “We always live in an uncertain world. What is certain is that the United States will go forward over time.”
He invests in America, Americans, what they buy to live and what their dreams are made of.
I’ve learnt from the likes of Buffett so I invest in what I believe in — Australia — and I try to do it when others are fearful.
I try to focus on the long-term and be wary of the short-term. Right now, the IMF and Moody’s are making the headlines but their predictive credentials aren’t great and sometimes they are used out of context.
In April 2018, Business Insider told us:
• The IMF forecasts GDP in Australia at 3.1% next year, well above recent estimates.
• Global growth is on track to reach 3.9% this year and next.
It now says the globe will grow at 3.3% and we will grow at 2.1% and it reminds me just how good these guys and gals at the IMF are at guessing growth!
And on Moody’s Analytics and our fall in house prices, at least the ABC slipped in a bit of positivity into its headlines. It went like this: “House prices set to fall another 10% before 2020 rebound, Moody's Analytics says.”
The headline is not really accurate, as Moody’s says the national house price fall will be 7.7%, while units will fall 4.3%. Melbourne will fall 11.4% for houses and 5% for apartments. Meanwhile, Sydney prices are to bottom out in the September quarter of this year, before staging a moderate recovery in 2020.
These are all guesses. They could be right or wrong to the high side or the low side but I do like the fact that they aren’t calling for 40% drops like some extremists expect.
These guys could be right if there’s a global recession and stock market collapse happens but let’s hope that the smarties of the business, economics and government world are smarter than the doomsday merchants.
Who would Warren Buffett believe?