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Maybe Warren Buffett Is Warning Us About Something

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Re: Maybe Warren Buffett Is Warning Us About Something

#11

Post by hacknat »

It’s important to remember that the stock market != the economy. You know who would be the first to say that? Warren Buffet.

Warren Buffet is actually a big believer in not making macro economic predictions. It just so happens that if you pick stocks like he does (based on fundamentals and a certain proprietary “discount”) you’ll probably avoid having your investments tagged in a recession.

Stocks in the Great Recession took a nose dive because of a market downturn, not the other way around. It is very possible (and much more common) for stocks to dip significantly and for the broader market economy to shrug its shoulders and say, “meh”.

We have familiarity bias though, so we think that the next one will look like the last one. Pro tip: it won’t.

Re: Maybe Warren Buffett Is Warning Us About Something

#12

Post by simonh »

digitalsushi wrote: post #2

I have no idea how money works. I have a 401k, it's got more in it than the median 60 year old in the united states, and I'm 20 years from that. And I am terrified of how little I know about how it exists or survives. I read these articles and get a sense of overwhelming urgency that, without any explicit indication, I should do something with my nest egg to make it safer to survive a crash. And then I keep reading,…

Too many people that try to take control of such investments fall prey to basic errors. They see a crash happening so pull their money out to safer investments, but it's already mostly too late so they have locked in losses. Then they see the market rally, so they re-invest their money in the market, but they already missed the start of the rally so have missed much of the potential gains.

Re: Maybe Warren Buffett Is Warning Us About Something

#13

Post by chosenbreed37 »

lethologica wrote: post #7
digitalsushi wrote: post #2

I have no idea how money works. I have a 401k, it's got more in it than the median 60 year old in the united states, and I'm 20 years from that. And I am terrified of how little I know about how it exists or survives. I read these articles and get a sense of overwhelming urgency that, without any explicit indication, I should do something with my nest egg to make it safer to survive a crash. And then I keep reading,…

Educate yourself. You don't need to know the intricacies of how markets operate, but a little financial understanding is, I believe, a must for everyone. Also, be aware that even when you do educate yourself and you do everything you think is in your power to 'safe guard' your nest egg, that there are are still a billion and one ways that it can all be wiped out tomorrow. Micro managing you're finances if you don't k…

> Educate yourself. You don't need to know the intricacies of how markets operate, but a little financial understanding is, I believe, a must for everyone.

I second this. Lot's of good advice here about letting the 401k ticking along. In the meantime start building some knowledge. It may take a bit of time but it will be worth it. But the basics should be accessible to everyone. There are many sources of information (of varying quality). Youtube, blogs, financial section of major newspapers, MOOCs, and last but not least books

Re: Maybe Warren Buffett Is Warning Us About Something

#14

Post by chosenbreed37 »

lowdose wrote: post #10

Maybe somebody should tell Warren Buffet his BFF Bill Gates took 80% of his money by convincing him "It takes 20 years to build a reputation and five minutes to ruin it. If you think about that, you'll do things differently." Warren is advocating to anybody willing to listen that they too should fork over all there monies like someone severely traumatized by Stockholm syndrome. Number 1 convinced number 2 he was way…

I'm lost. Could you be more specific about this supposed heist?

Re: Maybe Warren Buffett Is Warning Us About Something

#15

Post by mywittyname »

hacknat wrote: post #11

It’s important to remember that the stock market != the economy. You know who would be the first to say that? Warren Buffet. Warren Buffet is actually a big believer in not making macro economic predictions. It just so happens that if you pick stocks like he does (based on fundamentals and a certain proprietary “discount”) you’ll probably avoid having your investments tagged in a recession. Stocks in the Great Recess…

Additionally, the article doesn't really discuss how much cash he's holding relative to previous years.

https://www.macrotrends.net/stocks/charts/BRK.B/berkshire-ha...

Re: Maybe Warren Buffett Is Warning Us About Something

#16

Post by rhino369 »

digitalsushi wrote: post #2

I have no idea how money works. I have a 401k, it's got more in it than the median 60 year old in the united states, and I'm 20 years from that. And I am terrified of how little I know about how it exists or survives. I read these articles and get a sense of overwhelming urgency that, without any explicit indication, I should do something with my nest egg to make it safer to survive a crash. And then I keep reading,…

Just buy s&p500 index funds (or total market index funds). A crash won’t affect your long term retirement plans. You only have to worry about a crash <10 years before retirement.

Re: Maybe Warren Buffett Is Warning Us About Something

#17

Post by lowdose »

chosenbreed37 wrote: post #14
lowdose wrote: post #10

Maybe somebody should tell Warren Buffet his BFF Bill Gates took 80% of his money by convincing him "It takes 20 years to build a reputation and five minutes to ruin it. If you think about that, you'll do things differently." Warren is advocating to anybody willing to listen that they too should fork over all there monies like someone severely traumatized by Stockholm syndrome. Number 1 convinced number 2 he was way…

I'm lost. Could you be more specific about this supposed heist?

Buffett, 87, has since 2006 made more than $30.9 billion in donations to the charities, including roughly $24.5 billion to the Gates Foundation.

Re: Maybe Warren Buffett Is Warning Us About Something

#18

Post by mhb »

digitalsushi wrote: post #2

I have no idea how money works. I have a 401k, it's got more in it than the median 60 year old in the united states, and I'm 20 years from that. And I am terrified of how little I know about how it exists or survives. I read these articles and get a sense of overwhelming urgency that, without any explicit indication, I should do something with my nest egg to make it safer to survive a crash. And then I keep reading,…

I recommend reading about the Permanent Portfolio: https://www.investopedia.com/terms/p/permanent-portfolio.asp

The permanent portfolio was constructed by Harry Browne to be what he believed would be a safe and profitable portfolio in any economic climate. Using a variation of efficient market indexing, Browne stated that a portfolio equally split between growth stocks, precious metals, government bonds and Treasury bills would be an ideal investment mixture for investors seeking safety and growth.

Re: Maybe Warren Buffett Is Warning Us About Something

#19

Post by sleepysysadmin »

It's not news that people are predicting a 2020 recession. The bond yield inversions are literally people putting their money where their mouth is and betting on a recession. The definition of an inversion is that 3 month bonds yields better than 10 year bonds. The first inversions happened in March. It has been a mistake to go 10 year over 3 month. The 3 month bonds would have returned already and then you could have picked up the 10 year. It's completely irrational to make these decisions unless you are predicting a crash.

It's not just bonds. Price of Gold has skyrocketed since June; Gold is higher than it has been for years. Bitcoin is back above $10,000. These are your standard mechanisms to isolate your money from a crashing market.

https://www.instituteforsupplymanagement.org/ismreport/mfgro...

ISM is somewhat of a decent report. Soon as they lower below 50% it means manufacturing is shrinking; which means layoffs. July 2019 new orders are 50.8%.

Nissan is laying off 12,500. GM closing multiple plants. Ford has $20 billion cash stashed and layoffs. Chrysler is laying off thousands. Toyota, Honda, everyone is laying off.

Recession is coming for sure, no question.

Re: Maybe Warren Buffett Is Warning Us About Something

#20

Post by lbotos »

digitalsushi wrote: post #2

I have no idea how money works. I have a 401k, it's got more in it than the median 60 year old in the united states, and I'm 20 years from that. And I am terrified of how little I know about how it exists or survives. I read these articles and get a sense of overwhelming urgency that, without any explicit indication, I should do something with my nest egg to make it safer to survive a crash. And then I keep reading,…

Money is time, bottled.

Stocks/Bonds are money converted into "abstract human output". You are taking a bet that the group of humans that work at the companies that you've invested in will continue to become more advanced and efficient as to "generate value".

The stock market is "sentiment". It is collective group think as to what those companies are up to.

This is why you see people say "don't touch it". If you don't need the money now, the advances in "value creation" will possibly give you more money in the future.

I think the number one disservice that "stocks/investing" do is pretend it's not "gambling". Sure, you can minimize risk, and choose instruments that are 99% sound (gov bonds) but it's still _a gamble._

You are scared because you don't understand your risk exposure. (also, black swan events could change the exposure, but they are exactly that -- black swans)

You can:

- Decide to stop playing the game, convert your stocks/bonds into money which gives you absolute units and pegs your risk to inflation/deflation/government default.

- You can continue playing the game, and decide what your risk tolerances are, and adjust your strategy accordingly. This should give you a little bit more peace of mind.

If you want reasonably accessible exposure to these concepts, Khan Academy videos are free, you don't have to sign up to watch, and can fill in some gaps:

https://www.khanacademy.org/economics-finance-domain/core-fi...

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