After Donald Trump declared victory as the next president of the United States, the Dow Industrials, S&P 500, and Nasdaq Composite went wild. So, why was one investor the Grinch of Wall Street?
Wall Street ended at record levels. Investors pinned their hopes and expectations on a Trump administration lowering taxes, deregulation, and a president who like the US dollar and the share market to do well. Trump said we should prepare for a ‘golden age’ of investing.
The Grinch of Wall Street was none other than Warren Buffett with a personal net worth of $147 billion. Anyone would expect he’d be among the party splashing cash. But the Oracle of Omaha has been doing the opposite.
In June this year, Berkshire Hathaway sold 389 million shares in Apple. In fact, the company holds 400 per cent more greenbacks than it did 10 years ago.
Buffett routinely scoffs at any investor who tries to ‘time the market’. In other words, a person who sits on cash waiting for a global slump only to jump in hoping for a recovery. His latest actions appear to contradict his own advice. Is it a sign the 94-year-old is losing the plot?
Buffett is the most successful investor of all time. He has a few barometers and a mighty fine crystal ball—I doubt he has a crystal ball, but it would be a fun way to spice up the dry world of investing.
Known as the ‘Buffett Indicator’, it divides the value of US stocks by the US gross domestic product or (GDP). If the value of shares outpaces the economy, then it could be a sign everything is out of whack, called a bubble in share market babble.
The indicator flashes when markets go past 100 per cent.
As Mark Twain once said, history doesn’t always repeat but it often rhymes. Ominous indicators popped up before the Dot.Com bubble, the Global Financial Crisis, and the Covid crash.
So, where does the Buffett Indicator sit now? The value of shares is 208 per cent higher than the GDP.
The tricky thing about the future is, well, it’s plain old tricky.
Wall Street could continue to climb breaking all records and Donald Trump makes America Great Again.
Or else the Grinch of Wall Street has the last laugh.
ajhenryblog 