“Buffet-Gates-Narrative-Indicator”

Using narrative in your decision making

Open link to read just the headline

When you read the headline of the article

In addition to the aggregate absolute narrative – (try to ignore the source) – just look at what the headline means on a global basis – who is it coming from? What are the real implications for mood (and stocks)?

It’s coming from a guy who appears to be fully committed for the greater good. 

More importantly, who are his like minded friends?

Warren Buffett

What do they have in common?

The Giving Pledge

What else?

If you dig you’ll learn that David Rockefeller became a major influence on Gates and if you understand “the Rockefeller philanthropic focus” and why Rockefeller University came into being in 1901 it was all about Rockefeller Sr. putting his money into science for solving problems. Note according to the Wikipedia Rockefeller University profile you’ll learn the university has 36 Nobel laureates tied to it. This is real deal fiduciary roles and duty at the highest level.

And

Buffett is the ultimate fiduciary investor who is both smart and successful. His decision making involves:

  • Fundamental factors
  • Finding qualities of ingenuity and innovation
  • Reasonableness (a fiduciary quality)

I’m guessing Gates as a philanthropist shares a similiar decision making process

It seems, they are both fiduciaries committed fully to helping others, so you have to take them seriously

So the current market environment based on (“CAPE” or Mkt Cap/GDP as example) is telling us:

  • Stocks are way overpriced. For the fiduciary-investor this simply means “unreasonable.”

This is the reason Buffett is not a bull believer

It’s that simple

He will not buy stocks that are unreasonably priced, in an

unreasonably priced market environment

  • Furthermore “unreasonable” also means that regardless of some theory or narrative behind a product, technology and market cap, you should never buy something aka stock because of just the narrative.
  • The underlying fundamentals have to be connected and in line also.
  • There can’t be any disconnect.
  • And if there is an extreme disconnect, you have to make a prudent decision to adjust/trim your positions and allocations.

How do we know this?

Just take Buffet’s role as an investor and look at the approach and factors he uses:

  • Reasonable book-value plus a growth narrative for individual investment selection
  • Reasonable Market Cap/GDP for the overall equities/fixed mix
  • And as an example I’m speaking of a 70/30 mix in a bull to 50/50 or 35/65 in a bear.

Read more“Buffet-Gates-Narrative-Indicator”

An important reminder as we head into what could be a very ugly week for stocks

Before we get to the “important reminder,” the following chart is from the dynamic web-report, OECD Economic Outlook, June 2020, put out by the Organisation for Economic Co-operation and Development (OECD) twice a year. This highly followed report illustrates what Fed Chairman put into words in his recent speech, following the central bank’s two-day policy … Read more An important reminder as we head into what could be a very ugly week for stocks

Has the Market Topping Process Ended?

With the action yesterday in stocks not seen since Primary Wave 1 down in March, for asset allocators it begs the above question. The top part of the below chart reflects the S&P 500 price pattern since before the March 23 market bottom. The bottom half of the chart illustrates the bear market rally and … Read more Has the Market Topping Process Ended?

Stocks Update 1a: On increased volume, prices are just shy of eliminating 2020 losses

Stocks are within approximately 1.5%-5.4% of eliminating 2020 losses. S&P 500 The S&P 500 index, the most prominent index in terms of volume representing 54% of total volume across the four indexes, is within just 3% of it’s February high on a net increase in volume of 66%. NASDAQ The NASDAQ is the second most … Read more Stocks Update 1a: On increased volume, prices are just shy of eliminating 2020 losses

Aggregate Demand & Back to Normal

One only needs to look at the trend in railroad traffic this year vs the trend in railroad stock prices to see that investors are defining a “return to normal” economic activity as the pre-recession level. However, utilizing a reasonable 2% economic growth pre-recession rate (since 2007, economic growth has barely averaged 2%) and current … Read more Aggregate Demand & Back to Normal

Stocks are at an optimal reversal level

Yesterday, the S&P 500 rallied to 3130.94, filling a March 4 gap and reaching the all-important .786 Fibonacci retracement level, a common reversal point for second wave trends. Fibonacci, the math behind of the Wave Principle, is used to define turning points. The essential Fibonacci ratios used in recognizing wave retracements are .236, .382, .500, … Read more Stocks are at an optimal reversal level