Buffett: I'm buying stocks
"Fears regarding the long-term prosperity of the nation's many sound companies make no sense," wrote Buffett. "Most major companies will be setting new profit records 5, 10 and 20 years from now."
I started this blog on August 31, 2007.
The Dow was 13,357.74.
The S&P 500 was 1,473.99.
The Nasdaq was 2,596.36.
I'm suspending this blog on October 17, 2008.
The Dow is 8,972.33 (down 33%).
The S&P 500 is 947.87 (down 36%).
The Nasdaq is 1,734.47 (down 33%).
I'm taking the cowards way out and locking in my anti-prosperity thoughts while the locking in is good.
I guess that means I'm long-term prosperity neutral right now. I'd certainly never bet against Warren Buffett. I won't be buying stocks though. I'm fine with the real yields that TIPS currently offer. I will also continue to hoard toilet paper. Some habits may never die, lol.
That being said, I'm encouraged that commodities and oil have sold off, that real interest rates have risen (much to my surprise), that the euro and China have been discredited as superior safe havens (not to my surprise), that stock prices have come down to more reasonable levels (as opposed to hyperinflated), and most of all that Caterpillar (a stock I sold in 2004) has seemingly finally ended its "sure thing" only goes up ride. I do think the situation is somewhat different now. I simply never bought into the idea that a commodity boom would be good for prosperity (much like it wasn't in the 1970s). That was a major reason for my bearishness.
Our country still faces many challenges, but so do all the other countries of the world. I continue to believe that things will get worse before they get better (perhaps much worse), but that's a definite improvement from what I once believed. Namely, that things might not ever get better.
Deep down, I think I saw this day coming. I haven't created charts in a long time. That's partly because I didn't think much new relevant "bearish" information could be offered. Sure, the charts would look ugly, but we kind of knew they would be. What's more important is what they will look like in the distant future, and I'm not all that convinced one way or another.
This global commodity selloff feels like the real deal to me. The reason I think it might be different this time (very scary to predict such things) is because real yields have risen so much. Higher real yields choke demand for hoarding commodities. That was not the case in previous selloffs. Here's the chart that I feel best shows that something might be different this time.
TIP vs. IEF (2 year chart)
Note that the two funds (inflation protected vs. no inflation protection) tracked each other very closely but then diverged recently, in a major way. You will also note that I was/am on the wrong side of that trade. Fortunately, the modest pain in recent days (especially compared to what stock investors were feeling) is offset by the pleasure over the last year . Higher inflation was generating high distributions to me, which is not reflected in the chart. Using hindsight, I would have done just as well in the past year simply burying that paper money in the backyard though. Go figure.
I will continue to monitor the comments section of this post for those who wish to continue to chit chat into the distant future. It has been a pleasure.
Also feel free to email me directly at email@example.com.
The blog is suspended. You will note that it is not deleted. I reserve the right to return even more bearish than ever in the future, should conditions warrant it. Don't even get me started on how we're planning to fund Social Security and Medicare.
WSJ: "Inflation Fear Fuels Bond Rout" - Since July the 10 year yield has risen 50 bps.
1 hour ago