Throw Back to “Buffett Correction Theory”

Before i start writing these words, i just want to say that i’m very optimistic especially for the long term on the U.S economy.

Although until now my tone in my articles was cautious and little bit pessimistic about the Markets as a whole for the short term, i did mention a couple of times that if you own a good business, the long term outlook is positive, although when a correction or a crash arrives almost everyone is scathed and the winner is determined by who losses less.

I said in the “The Buffett Correction theory” article that:

“I believe that we are on the highway for the next market fall it’s only a matter of time”

You can’t know if it’s going to be a crash or a correction but markets are going to go down, if somethings doesn’t change.

As value investors we shouldn’t try and TIME the markets, but there are times to buy stocks and times to sell them and times to sit on the sidelines and examine which dip in some stocks screams “a bargain” and jump in and buy.

Trump’s adminstration goals gave wings to the indexes and made them soar high like eagles to their all time highs after his election, those wings were formed by hopes that the administration will make it easier on banks with less regulations that were placed post crisis, Massive infrastructure plan and Tax reform.

Late-night vote for the “skinny” Obamacare repeal bill was blocked by the senate, it shows how hard it can be for the Republicans to make a move on anything and that’s one problem.

In general we need a good GDP numbers because it’s one of the most important factors in the economy, it gauge the health of a country’s economy, and it is good to know that the overall economy got your back when valuations are high.

70% of the US GDP depends on Services and personal spending, and it’s due to today, let’s hope we have a good number here.

I didn’t want to get into specifics and try to time the correction but also we are in earning season and Amazon drop could drag and put some pressure on the NASDAQ also other big companies could miss earnings and cause sell-offs in certain sectors.

We are in all time highs, everyone seems very optimistic and in this times you should remember that euphoria is your enemy, just be patient don’t try to time the market but have a pile of cash to take advantage of the drops.

*The picture presented in this article, taken from a newspaper back in October 25th 1929 when the market crashed (which i don’t own), i added this picture to show that even in the darkest times you should always be optimistic.

 

 

 

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