What the market is volatile or even dangerous many choose to simply follow the actions of smart investors like Warren Buffett. If that is the case which Warren Buffett Indicators should you follow? First of all he is buying stocks. Bloomberg reports that Buffett bought $12 billion of stocks in the 10 weeks following the election.
Warren Buffett added to his stock portfolio at Berkshire Hathaway Inc. in a big way after Nov. 8.
“We’ve, net, bought $12 billion of common stocks since the election,” he said in an interview with Charlie Rose that aired on Friday. Buffett didn’t identify the securities that he picked.
Purchases of that magnitude represent a major pickup in activity for Omaha, Nebraska-based Berkshire. During the first nine months of last year, the company bought $5.2 billion and sold or redeemed roughly $20 billion worth of stocks, according to a regulatory filing. In 2015, Berkshire bought about $10 billion of equity securities.
If Buffett is buying shouldn’t we all pile on and buy stocks? Unfortunately there is another Buffett indicator that he seems to be ignoring. The Lombardi Letter says that a Warren Buffett indicator predicts a stock market crash in 2017.
One of Warren Buffett’s greatest investing mantras is to “be greedy when others are fearful and fearful when others are greedy.” Never has more sound advice been given, especially in the early days of 2017.
The year may still be in its infancy, but investors already know it’s going to be a volatile 2017. First, there’s President Donald Trump’s economic action plan to cut taxes and increase spending. Will this translate into sustainable economic growth? What about Donald Trump’s perceived protectionist views? Will it lead to a trade war with China and Mexico?
This writer believes in Buffett’s advice to be careful when everyone else in piling into stocks and buy when the sellers are depressing the market. Which Warren Buffett indicators should you follow?
Actions Speak Louder Than Words
Buffett has often spoken out against buying into a rising market but actions speak louder than words and today the Oracle of Omaha is buying in large amounts. Whatever his opinion on over bought markets he does not seem to believe that such is the case yet.
Fundamentals versus Technical Analysis
Buffett is a long term, buy and hold investor. He says that he cannot guess what a stock will be worth in a year to two but is sure that the market will be much stronger in ten, twenty or thirty years. Because of his long term approach he avoids tech stocks which can sky rocket and then fizzle all within a ten year span. Traders can avoid the pitfalls of long term investing with technical analysis.
Day traders using technical analysis rely upon the fact that investor sentiment and action tends to repeat itself. Analysis solely based on technical factors is a kind of statistical prediction. Statistics does not predict which investor will buy which stock at which price but it does often predict that a certain percentage will buy or sell certain types of stocks.
The market has been going up but may well correct. Traders keep their eye on the daily moves of the market and use technical analysis to stay one step ahead.
