Someone asked me about investing personally the other day. I basically told them if you find a company you really like and use, and the shares look cheap, then buy it and hold it forever. As they had never bought shares before, I directed them to Warren Buffett letters to shareholders to get an education in long term investing.
I originally thought Warren Buffett’s bullishness on US stocks in 2008 was misplaced. For me, US treasuries following in the footsteps of JGBs signalled a long term deflationary bust in the US.
Low bond yields in Japan has meant that the Nikkei still below highs in US dollars seen in 1991. China has low bond yields, and a weak equity market. So what makes the US so special? What did Buffett see that I did not?
During the GFC, Berkshire Hathaway, with its heavy focus on the US consumer, had suffered with the rest of the market. At the time, I thought we were heading to a Great Depression outcome, but Warren was very bullish, and started buying aggressively. Berkshire is now a member of the USD 1 trillion market cap crowd. That is, contrary to my expectations, betting on the US being special WAS the right trade - and Buffett has cleaned up. In my defence, I thought he was talking his own book as his stock got punished during the GFC.
Buffett has called this market perfectly. So what should we make of his sale of Apple stock?
