No. of Recommendations: 26
Of course no one knows, but everyone wants to know.
Take a simple idea and take it seriously. This is how it looks to me in my simple mind.
This is a major policy error. Back of an envelope decision by an arrogant overlord. The result will be a global recession. This is a major problem for the following reasons:
The public finances are in a very poor condition. We are swimming towards the vortex.
Consumers are going to struggle.
Job losses and major life changes for many.
Inflation will come back.
Central banks will have a major problem dealing with a stagnation and inflation. What can they do?
Equities prices are not cheap and can fall a lot. Markets have had casino like characteristics of late and that can unwind fast and painfully.
If true fear takes hold in the economy and equity markets, we could have a major market decline. Berkshire is way more protected than other firms for the reasons we all know.
If we get a 1970s type crash, of 50%+ proportions for the general US market, Berkshire can go down with it but maybe only by half as much. In 2007/08 Berkshire’s share price fell almost as much as the market but there were those equity options Buffett had bought which spooked the market in the short term.
This time, Berkshire is in a much stronger position with its cash and it’s cash-flowing operating companies and a smaller equity portfolio that will be marked down with the general market.
This does not look like a buy the dip moment. It looks more like everything will be cheaper three years from now. Personally, I will find it really hard not to start buying too early. But I will keep reminding myself that I’m older and might need the cash I have to live on during difficult times. I got lucky recently thanks to Buffett and this board. I’m prepared this time.
I hope I can stay with a large cash percentage until:
1. Berkshire gets to 1.1 book.
2. FTSE 100 drops from current 11 PE and 4% dividend yield to 8 PE.
3. Some of the individual companies I think I know quite well and which are already good value, drop 30% or more. Companies I’d be happy to hold for decades.
It’s a very sad time for a lot of people who are going to be impacted. We are already starting to see the impacts around the world. Buckle up and don’t buy the dip is my plan.
