July 23, 2021

9 thoughts on “Warren Buffett talks about Great Depression – Nobody knows what the market is going to do tomorrow

  1. Hi Rolf

    Nice picture by Hanoi! I went to Danang and Hoi An too last year which was great.

    Anyway, back to the market. It's hard to ask equity investor to think about the risk more than the rewards. You can compartmentalised some of it but not most of it since otherwise that very same person would either have to be a bond investor or Warren Buffet, or a blended of the two 🙂

    1. Hi B,
      Tks. I was suppose to have my holiday in Danang last year, but things crop up and I postpone ticket till Apr this year with hotel also booked, but guess u know the rest.

      Agree that human nature tends to think about rewards more than risks. Likewise myself think the same. I just want to use this article to say the other side of the coin for people to realise there are 2 sides.

      Not discouraging investing now, nor encouraging. 🙂 I am still investing now…. at least in Apr, I took some positions.

  2. If DOW down by more than 5% tonight, tmr one or more markets in Asia and Australia will be down. 🙂

    1. Yes very much. Asia and AU, especially SG tends to trend quite similar to US / Dow.

      Guess we should see more rally in the market as economy re-opens. At the same time, more earnings are reporting this month. Hence, really no point to bet which way.

      What you think?

  3. With reinvested dividends the Dow took 6 years to regain its all time high of 1929, i.e. by end 1935. But I doubt a normal human will have the stomach to not only hold, but to also reinvest all his dividends back into a market that is dropping -50%, -70%, -80%, month after month, year after year.

    The big difference between today and GD is that during GD the govt withdrew liquidity from the economy, and they did it early on during the early 1930s, thus making things worse. The economists at the Fed at the time thought that loose monetary policy was to blame for the excesses of a wild 1920s boom & so leading to a bubble in stocks. They were right in their analysis but gave the wrong medicine for the wrong sickness. It was like closing the barn after the horses had ran off.

    The protectionist anti-trade policies adopted by most countries at that time also made the GD worse … and contributed to many countries' warlike & belligerent policies. This time round, we have to see the US-China situation.

    Becoz of the trillions of liquidity today, I don't think it'll be like GD. The trade war & the anti-fragilisation of supply chains however, will be a wild card for both China & Singapore.

    I think markets will be in a large sideways churn for the foreseeable future, going between -10% to -40% of the all time highs. At least till there's a vaccine or if the virus dies out e.g. through herd immunity, such that there won't be the sword of Damocles of repeated lockdowns after economies reopen for business.

    It is a medical problem, not a structural problem. Hence there's a high probability of end date being earlier than expected. But there'll be winners & losers among individual stocks and companies in terms of how much the new realities impact them & whether they can take advantage e.g. ultra cheap financing, changed consumer behaviour, WFH movement, greater virtualisation & onlining of commerce, work & entertainment.

    Covid & its repercussions SHOULDN'T be the reason why anybody should or shouldn't invest, or how much to invest. This question should be answered by other more fundamental principles.

    1. Hi, thanks for taking the time come back and the great insight and comments.

      I am definitely a positive and optimistic guy, not naysayers. So below reply is not to say there will be a GD, but another side of the coin perspective. I myself pick up stocks last month and in Mar! 🙂

      It’s not just having stomach to reinvest div 6 yrs, but perhaps u may already lost your jobs, or huge paycut, or lost ur house in 1930-1935. With many other problems in GD, not just single sided investment perspective.

      Not really fair to compare Covid with GD, or GFC. This crisis has nothing to make reference to, unlike the past crisis which is generally related to financial. Hence, I agree with WB that really nobody knows!

      Like I explain to B, I do not think we in GD mode now. Nor, I wanted a GD, nor I speculate it will happen. I am just providing the other side of the coin! Definitely not to say we should not invest, but to what extent, what mindset, n have u consider the worst situation? Perhaps we or our wife will have lower income, perhaps a big illness/accidents hitting during recession. Ok, Singaporean mindset… no worry lar…Govt will provide! No worry lar, it will not be me mindset.. is this type of mindsets truly what we want to have and what we want our children to have?

      Unless there is a big 2nd wave and world economy including China is shutting again for as long as 6m to a year. Then we can see a clearer picture. Will that happen? Do we dare to say it will DEFINITELY NOT happen? So there is a possibility. Then why are we only thinking about the optimistic view that we will be winners in stocks?

      If world shut down for another 6m-12m due to Covid, then can we confidently say the medical problem is a medical problem ONLY?, and it will not lead to structural problems. I think the medical problem may also be one way of revealing the weak structural problem the world is building upon since 1970 when USD de-pegged from gold.

      Actually I was just explaining to another blogger about the withdrawal of liquidity and tax increase during GD. That is not the fundamental reason of making economy worse as many have thought and just read from Wikipedia / or other general source. And it is not about the loose monetary policy back then, or wrong medicine which many is misleaded or mis-guided. I will explain in my next post, what causes the GD.

      Trillions of liquidity is only good temporary! In the long-term there will be structural problems, inflation, hyperinflation, severe deflation! Refer to my earlier post.


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