Another "Why Does Buffett Think This?" Question
Hey Monkeys. This is yet another question trying to understand Buffett's contrarian logic. On another popular thread from last year, user " I'm done" responded to a "why does Buffett think this question" with
"he has 2 guys running most of the money nowadays so he splits time between buying cherry coke and opining about politics, taxes, active/passive, and income inequality."
Which can explain a lot of what Buffett says, but maybe not this quote, which I found in The Essays of Warren Buffett:
"Forming macro opinions or listening to the macro market predictions of others is a waste of time . . . In 54 years we have worked together [he and Munger], we have never foregone an attractive purchase because of the macro or political environment, or the views of other people. In fact, these subjects never come up when we make decisions" (85).
Can he have this position because he imagines Berkshire holding each of their investments for 50-100 years? It's just hard to understand how an investor could avoid thinking about regulatory issues for example, especially in industries like healthcare. Anyway, any thoughts?
Really, if you take the long, long run approach, that takes a lot of trends and policy out of the equation.
For example, Apple, Coke, the airlines, safe to say they will probably be around in 100 years. So for him, it's just buying them on discount.
Other stocks/companies, it's hard to say if they will be here in 100 years or not.
It's like, "how will tax policy affect Coke this year", "IDK, but it'll be up in price in 2118".
Only one member of the 1918 DJIA still exists. What makes you think any given member of the 2018 DJIA will exist for the next 100 years?
I guess nothing really makes me think that, because I didn't say it.
The DJIA isn't the end all be all of golden touch of stocks, they do take stocks/companies out of the Dow.
Point is, sometimes investors shy toward or anyway from an investment based on a short term thesis. That's one way to invest, but that's not typically how Buffett invests.
I would be very cautious taking anything he says on face value. Beyond the facade, a much sharper and more cunning Buffett resides.
With that said, I think his general point here is to look at the fundamentals, and don't try to gain value through market timing. Macro aspects that are directly relevant may qualify as fundamentals for some firms, and I doubt he is ignoring that.
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