What to do now

It’s a most turbulent and unique period for every investor. Even Warren Buffett never has such experience over his very long and successful career as the most respected investor in the world. He has not made any drastic move and is sitting on $137 billion dollar cash pile, except selling all the airline shares. There are a lot of people thinking he is too old to make any smart move quickly, and they can outsmart him. The wild fluctuation of certain shares, such as Hertz and airlines, which were impacted severely by the pandemic, are the evidence of active trading by these people.

Don’t Panic

A friend called me yesterday, asking what happened to my holdings in US shares. This is a normal reaction of ordinary people after a stock market crash anywhere.

My answer was, “Well, the shares indeed dropped a lot. But I never doubt the US will still be the most prosperous country in the world in next few decades.”

3 things would definitely trigger a bear market

Stanley Druckenmiller, one of Wall Street’s most successful investors said that 3 things would definitely trigger a bear market from now on.

-[A] change of leadership in the White House that goes to some of the anti-capitalists.
-By the end of this year we started to get enough inflation that the Fed started tightening,.
-We had a credit event. And if you look at the credit markets, it is very obvious that you’ve got a really lot of bad apples out there that are not being exposed because the interest costs are so low.

My 2nd Tenbagger – The Tencent Story

Note: a “Tenbagger” is a stock having increased ten times of the initial value for an investor. The term was created by Peter Lynch, the most successful fund manager in the world.

My Prediction Comes True

Since the trade war between the US and China became inevitable, both Shanghai and Hong Kong stock market went down, so was the exchange rate of RMB. Many P2P platforms crashed. Hundreds and thousands of middle class people lost their life savings. Yet, this is just the beginning. China’s problem is far greater than this. Be prepared for worse, although it’s a bit late now.

The following is what I written on our web site: (valuebay.net)

Buy America & Avoid China
Sun, 02/28/2016 - 12:18 — William Dai

The Good News is the Bad News

The most recent news in financial world is “Warren Buffett's Berkshire Hathaway had $111 billion of cash on its balance sheet at the end of last quarter, the most in the company's history.” This also implies that almost all investors using Warren Buffett’s way of investment have made lots of money in the past few years.

Is iRobot A Good Investment?

I bought iRobot at $30s and sold about half of the shares hold at over $100. I regret that I failed to sell them all. Even after iRobot's dropping about 40% from the top, I am still hesitating whether to go back into the game with more investment because I am not sure whether the company can defend their leading position in the long term. It seems that many companies can make a robotic vacuum cleaner now.

Here is an excerpt from a brilliant article that Warren Buffett penned in Fortune in November 1999, "Mr. Buffett on the Stock Market:

Seven insights from legendary investor Warren Buffett

Warren Buffett is one of the world's greatest investors and business leaders. Over the years the man who famously made today's equivalent of over $50,000 as a teenager has uttered some pretty prophetic statements.

1. "It is not necessary to do extraordinary things to get extraordinary results."
Buffett suggests that the best successes in the workplace can come from those who are consistent. Flashy ideas and grandiose plans only take you so far. In the end, the results speak for themselves.

Human Weakness in Investment – Herd behaver

We almost cannot live without the Internet now. If you are not too young, you must remember the dot-com bubble in 1995–2001. Over the period, investors were crazy about companies in the Internet business and were ready to buy these companies at any prices. On the other hand, companies could cause their stock prices to increase by simply adding an “e-” prefix to their name or a “.com” suffix, which one author called “prefix investing”. By the end of the 1990s, the NASDAQ hit a price-to-earnings (P/E) ratio of 200.

Human weakness in investment –incapable of self-reflection

There is a saying that “love is blind”. This means a person in love would not be able to see any imperfection in the lover. This is maybe an extreme case. However, people do have the tendency of refusing to change their position when the relevant situation having been changed, or have bias on anything against whatever they initially believed in.

For example, a boy was brought to the same church by his parents frequently, he would not only mostly likely believe in the same religion when he grows up, but also strongly reject any other religion or atheism.

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