“By periodically investing in an index fund, the know-nothing investor can actually out-perform most investment professionals.” Warren Buffet
Warren E. Buffett, Chairman and CEO of Berkshire Hathaway Inc., and Charlie T. Munger, Vice Chairman of Berkshire Hathaway Inc., provide “A Wealth of Wisdom” in this CNBC video:
https://youtu.be/rQJWHocG-50
Berkshire owns American-based property, plant and equipment – the sort of assets that make up the “business infrastructure” of the U.S. – with a GAAP valuation exceeding the amount owned by any other U.S. company. Berkshire’s depreciated cost of these domestic “fixed assets” is $154 billion.
The culprit behind the recent stock market sell-off was the rapid rise in 10-Year U.S. Treasury bond yields. The 10-year Treasury yield remained above 1.4%, after surging to 1.6% in the previous day session to its highest level since February 2021 and more than 0.5% higher since the end of January, according to CNBC.
The spike in the 10-year yield , which is used as a benchmark for mortgage rates and auto loans, is reacting to positive economics as vaccines are rolled out and GDP forecasts improve, which should benefit corporate profits. But the move could also signal faster-than-expected inflation ahead. The sheer pace of the rise has also had the effect of dampening investors’ appetite for richly valued areas of the market like technology and other growth stocks. Higher rates reduce the value of future cash flows so they can have the effect of compressing equity valuations.
All three stock benchmarks — Dow Jones Industrial Average , Nasdaq and S&P500 — were tracking for weekly losses ahead of the final trading day of February. The Nasdaq was down nearly 7% from its February 12, 2021, record closing high. The Dow and S&P 500 both remain solidly in the green for the month. However, the S&P 500 was off almost 2.7% from its last record closing high, also on February 12, 2021, and the Dow had its worst day in nearly a month on Thursday.
Additionally, inflation concerns are being stoked on the thought that the $1.9 trillion COVID-19 stimulus bill — which passed the House of Representatives — on top of accelerating growth could overheat the economy.
Economists and investment managers say the bond market is reacting to positive economics as vaccines are rolled out and GDP forecasts improve, which should benefit corporate profits. But the move could also signal faster-than-expected inflation ahead.
What to watch today: Stocks try to recover from Thursday's tech-led rout https://t.co/zNlAmp3JIQ
“If you really think of it, when a stock doesn’t pay dividends, there really isn’t a whole lot of difference between a share of stock and a baseball card. If you put your Mickey Mantle rookie card on your desk, and a share of your favorite non-dividend paying stock next to it, and let it sit there for 20 years. After 20 years you would still just have two pieces of paper sitting on your desk.” Mark Cuban
In a fantastic interview this morning, Mark Cuban said on CNBC “Squawk Alley” that he “believes the Reddit traders who helped spark the GameStop short squeeze and subsequent stock surge will remain a force in the market”.
“I always was taught, ‘You get long and you get loud,'” Cuban said. “You get out there and create more buyers for your stock and the stock price goes up and that’s exactly what’s happening here, except it’s just WallStreetBets that’s doing the ‘getting loud.'”
Billionaire investor Mark Cuban: This is how I determine whether to hold or sell a stock https://t.co/ryVF4lcfw0
Cuban said he believes those online investors have gained valuable knowledge from the short squeeze, as well as from the volatile cryptocurrency market. “I think this is real,” said the “Shark Tank” investor and owner of the NBA’s Dallas Mavericks.
“I think now that they’ve recognized their power and now that they’ve learned some lessons, we’re going to get more of it, not less of it,” he added. “It’s not going to be a set of circumstances where all these people lost money, they’re going to go home with their tail between their legs and they’re never going to do this again.”
'This is real' — Mark Cuban says Reddit traders won't go away just because they lost money https://t.co/P1NuEA3gmj
Cuban piled on during his interview with CNBC with remarks that some investors might regard as heresy.
“The narratives that we create to sell stocks — price earnings, right, discounted cash flow, those are all subjective,” Cuban said. “We just have been told by Wall Street that the lower the price-earnings ratio against your growth rate, then that’s an indicator the stocks’ going to do great things. Or Graham and Dodd in terms of asset valuation — that doesn’t necessarily hold in a digital environment in the way it did in the past.”
When pressed by the interviewer about his comments, Cuban remarked, “Yeah, they used to trade salt for gold, too,” Cuban replied. “Things change.”
