Warren Buffett and his Effect on the Stock Market!

 

He really influences the influencers, but sometimes his messages are very misinterpreted and these misinterpreted messages can lead to stock market bubbles. (Check out some Warren Buffet videos when you get a chance)

 

A lot of people can really go wrong when listening to Warren Buffett too passively and perhaps even too literally as well.   Don’t get me wrong it is through no fault of his own, but when he is misinterpreted or taken out of context his words carry so much weight that they can have a large negative effect. 

 

 

(Take a shot!!….Chance to Win a FREE Currency Course Bundle (value $1300.00) by Emailing Us your answer no later than 7/30 9AM EST and 3 Names will be randomly picked and named as Winners!! (Must be a blog subscriber) Which factor influences a country’s currency the most? a) their stock market b) their form of government c) their interest rates d) their population 

 

If you listen to him today, you might think that he the eternally optimistic about the economy and the stock market.  

 

Buffett is optimistic now about the long term outlook of the economy, but who really isn’t? When someone spends a lot of time talking about how the economy and the market will be better in 10 -20 years from now, you know things are on the surface are not that good. 

 

Investors should always be cautiously optimistic (like Buffett) about the long term and nothing should ever be taken for granted. 

 

This long term optimism leads to short and medium term euphoria which leads to bubbles, and we have seen this in the real estate market and twice in the stock market in the last 10-15 years.

 

Investors should never be locked into long term optimism, because it leads to too many passive decisions about their money, such as the belief that the long time horizon will take care of everything. I will not deny a certain degree of truth to this, but our investments deserve more attention. 

 

We should be cautiously optimistic about the long term, and only when everything has gone to hell in a hand basket should we be completely optimistic about the long term (like Buffett).  When there is nothing else to be optimistic about! 

 

Just so I am not taking Buffett out of context, when you hear Buffet speak now, he is about 75% optimism and 25% pessimism. A couple of years ago when things seemed OK he was at least 75% pessimism and 25% optimism. 

 

He was very bearish on real estate and who can forget his calls on the weapons of mass destruction.  This ties right into his philosophy to get fearful when everyone is greedy and greedy when everyone is fearful! 

 

At the very least even the most basic 401k investor should be concerned about the medium term trends and perhaps even short term trends in markets.