Sensex
|
| Introduction of Long Term Options Contracts on NIFTY for trading | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
"Eight for '08"
Warren Buffett became one of the wealthiest people in the world by
making predictions and putting money behind those predictions. Every
time he buys a stock or a business or some other investment, he's
forecasting the future.
Judging by the incredible returns of his holding company Berkshire
Hathaway, Buffett and his colleagues are very good at making those
predictions.
Of course, it helps when you can give your predictions plenty of time
to come true. That's one reason Buffett's favourite holding period for
investments in "outstanding businesses with outstanding managements"
is "forever." After all, "We don't get paid for activity, just for
being right. As to how long we'll wait, we'll wait indefinitely."
1. Recessions can't be avoided forever.
In the last few days, Buffett told that if unemployment picks up
significantly, the "dominoes" will fall and the U.S. economy will fall
into recession in 2008. He's not sure, however, that unemployment
will go up next year. In fact, he's surprised that all the weakness
we're seeing in housing hasn't affected the jobs market ... yet.
Here's what he is sure about: "It is the nature of capitalism to
periodically have recessions. People overshoot."
2. We'll survive future recessions just as we've survived past
problems.
As Buffett told in August, "We've got a wonderful economy... There's
never been anything like that in the history of the world. We live
seven times better than the people did a century ago on average...
We've had problems all along. If you look at the last century, we had
that Great Depression and World War Two, we had the Cold War, we had
the atomic bomb, but the country does well."
3. Recessions will create opportunities.
"I made by far the best buys I've ever made in my lifetime in 1974.
And that was a time of great pessimism and the oil shock and
stagflation and all those sort of things. But stocks were cheap."
4. All stocks won't be cheap.
Like Ted Williams waiting for the right pitch, a successful investor
waits for the right stock at the right price, and it doesn't happen
every day. "What's nice about investing is you don't have to swing at
pitches. You can watch pitches come in one inch above or one inch
below your navel, and you don't have to swing. No umpire is going to
call you out." You get in trouble, Buffett says, when you listen to
the crowd chanting "Swing, batter, swing!"
5. The crowd will make mistakes.
Buffett cites this piece of advice from his mentor Benjamin Graham:
"You're neither right nor wrong because other people agree with you.
You're right because your facts are right and your reasoning is right—
and that's the only thing that makes you right. And if your facts and
reasoning are right, you don't have to worry about anybody else."
6. Investors will mistakenly think falling stock prices are bad.
"If they reduce the price of hamburgers at McDonald's today I feel
terrific. Now I don't go back and think, gee, I paid a little more
yesterday. I think I'm going to be buying them cheaper today. Anything
you're going to be buying in the future, you want to have get cheaper.
7. Good times will prompt bad decisions.
In his 2000 Letter to Berkshire shareholders, Buffett compared the
crowd that buys big when prices are high to Cinderella at the ball.
"They know that overstaying the festivities - that is, continuing to
speculate in companies that have gigantic valuations relative to the
cash they are likely to generate in the future - will eventually bring
on pumpkins and mice. But they nevertheless hate to miss a single
minute of what is one helluva party. Therefore, the giddy participants
all plan to leave just seconds before midnight. There's a problem,
though: They are dancing in a room in which the clocks have no hands."
8. There will be more dancing at another wild party followed by
another painful hangover.
Looking back at the Internet bubble, Buffett is quoted as saying,
"The world went mad. What we learn from history is that people don't
learn from history."
Happy Investing
Regards
Rohit