Economy, Psychology and the Market

What affects the Mr. market?
Mass psychology.

Currently, we believe there will have inflation in the U.S. as a result of greenback emission and there will be no double dip recession.

Meanwhile, the U.S. market performance is currently lagging behind all other countries. Additionally, USD has weakened significantly.

What do you think will happen to the earnings?
It should recover slowly but since most of the S&P and Dow Jones companies are MNCs, a weak USD will lead to higher than expected earnings. Aggressive cost cutting also has it impact.

What if the current interest rate is being held at such low level for too long?
We are not going to put money in the bank, let’s go and buy some property or stocks to hedge inflations. So, money is chasing asset. Just another bubble.

What will be the short term impact to the market?
WE SIMPLY DON’T KNOW. However, if we assume that people becomes over optimistic due to good earnings reported or they just chasing asset to fend off inflation, CHANCES are U.S. market will overshoot.

Many fund managers have missed up the recent bull run of the stocks market, What would they do?
If we try to read their mind… they are likely to be fearful because they have underperformed, and they are also fearful that the stock market would collapse once they get in. So they might wait for a little bit longer, chances are they will jump in with both feet because they don’t want to look fool if the U.S continues to shoot up.

Lastly, What so special about U.S.?
The U.S. has a free market system, excellent legal structure.
"Our economic system has worked extraordinarily well over time. It has unleashed human potential as no other system has, and it will continue to do so.” Warren Buffett

So what if I am wrong?
Don’t worry, we are value investor, we only buy quality companies at undervalued price or mediocre companies at dirt cheap price, therefore, chances are we would do well in the long term.

If I am wrong, this would be a good news to those who still has some pocket money, Prada and Wells Fargo don’t often have DISCOUNT.

Magic word in investing?
MARGIN OF SAGETY.

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