Independent Financial Advice

Are you are running out of patience with this market?  For every piece of good news it seems there’s a corresponding bad news item.  For every company exceeding earnings expectations, there seems to be one guiding future earnings lower.  In this generally negative setting the market seems incapable of grabbing a foothold and frustration has become the rule.

But that’s often what markets do – frustrate people.  Even legendary investor Warren Buffett of Berkshire Hathaway,  affectionately called the “Oracle of Omaha” by his followers, experiences occasional frustration with the markets.  But his frustrations are different than those of most people’s.  He is frustrated when the markets are high.  Why?  Because as a value investor he can’t find any bargains to buy.   

Look at what he wrote in his company’s 1999 annual report. Remember, the markets were on fire that year.  “We will someday have opportunities to deploy major amounts of cash in equity markets -- we are confident of that.”  Here, in the middle of a roaring bull market when cocktail parties were awash in talk of killings being made in stocks, is one of the world’s most savvy investors complaining that there is nothing to buy!

And he showed patience and didn’t buy much until the markets began to lose steam.  Here’s what Mr. Buffett had to say in the 2000 annual report.  “We purchased several companies whose earnings will almost certainly decline this year from peaks they reached in 1999 or 2000.  The declines make no difference to us, given that we expect all of our businesses to now and then have ups and downs.  We don’t care about the bumps; what matters are the overall results.”  One of the world’s most successful investors became famous for two things - patience and holding for the long term – are glaringly evident in these reports separated by just one year.

Our point is that frustration with the markets affects us all.  Some sell into that frustration.  Others, like Warren Buffett, are waiting to buy that frustration at bargain prices.  Which side do you think you want to be on?

To learn more, you may find it helpful to read our other articles about the traits of successful investors, how investor behavior is a key determinant to long term results or thinking outside the style box.  If you have specific questions about your current portfolio or retirement planning, please contact us for a complimentary consultation.  You can also learn of new articles if you Subscribe to Independent Financial Advice by Email