Warren Buffett could teach traders in dogecoin, GameStop and other hot trends a few things about ‘Mr. Market’

MarketWatch2021-04-22

Be skeptical of fads, fashions and trends and operate within your circle of competence MarketWatch photo illustration/iStockphoto As the old joke goes, St. Peter had some bad news for an oil ...

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Comments

ElginLow
2021-04-25
ElginLow
Nice!
- J355:
  What is nice??
MrPrickles
2021-04-24
MrPrickles
Does anyone know if we can vote because we have $gme shares here??
Deb87
2021-04-23
Deb87
Golden words!
HappyTrade
2021-04-23
HappyTrade
Like?
amazinggrace
2021-04-23
amazinggrace
Good read, and a lot of wisdom in Warren’s actions. I always view buying stocks as being a part owner of a company, you only choose companies you believe in (which requires patience)
tall_panda
2021-04-23
tall_panda
Good read

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There’s no way to fit you in.”\nAfter a moment, the prospector asked to say just four words to the present occupants. That seemed harmless to St. Peter, so the prospector yelled, “Oil discovered in hell!”  Immediately, most of the oil prospectors stampeded out for the nether regions. Impressed, St. Peter invited the prospector to move in and get comfortable. The prospector paused, saying “No, I think I’ll go along with the rest of them.  There might be some truth to that rumor after all.”\nLet that be a warning to CEOs and shareholders. Steering clear of rumors and self-delusion has been one of Warren Buffett’s key rules, ingrained into Berkshire Hathaway for years. We all need to hear such lessons repeatedly because reality’s temptations are always at war with our ideals.\nThe serial frenzies in meme stocks like GameStop and cryptocurrencies like dogecoin make this a good time to contrast what investors should do from what many seem to do. Comparing Berkshire’s and crypto’s faithful is apt given their outsized followings: an estimated 30 million Americanshave traded cryptocurrencies and 30 million are expected to stream this year’s Berkshire virtual annual meeting on May 1.\nBuffett defines Berkshire as a corporation with a partnership attitude. The value of each investor’s stake will rise (or fall) in lock step. This contrasts with how many seem to view companies with meme stocks or most of the crypto space. There, the culture is casino-like, where a small few stand to reap unimaginable riches while the overwhelming majority lose their shirts. \nMoreover, Berkshire’s culture emphasizes patience and permanence. The company ideally holds investments and businesses forever and encourages its shareholders to hold indefinitely, through thick and thin. In the world of meme stocks and cryptocurrency trading, a strong norm favors immediate payday profits to be taken off the board.  \nRelatedly, the Berkshire ideal accepts that it requires decades to build capital and that accumulating wealth entails skill and time — as well as a bit of luck. In contrast are those who strive to get rich quickly — and effortlessly. Today, some investment market players even seem to believe that everyone should be rich, as a matter of entitlement.\nThe ideal Berkshire investor focuses on business, operating strategies, products or services and competitive advantages. For many in the meme-crypto world, what counts is hype and adrenaline, not whether there’s a business plan, let alone operations or customers. The Berkshire model is skeptical of fads, fashions and trends, while dogecoin and other cryptos thrive on these.\nThis leads to the Berkshire canon’s cardinal principle: the circle of competence. It prescribes to invest only in what you can understand with a moderate amount of effort. This excludes at least some meme stocks and many currently faddish “blank-check” IPO-mergers. For most people, cryptocurrencies are outside of their circle of competence. Indeed, large numbers of investors nowadays appear to be way out of their circle of competence.\nFor investments within one’s circle of competence, Berkshire adherents appreciate that prices fluctuate widely and no one can predict such volatility. “Mr. Market” is a moody manic, always willing to trade with you at the going price, sometimes elevated, sometimes depressed.\nFollowing from both the limits of personal competence and the whims of markets, the Berkshire playbook demands a wide margin between the price paid and the value received. In Berkshire’s value-investing lexicon, this is the “margin of safety,” and Buffett has long said that these are the three most important words in investing.\nFinally, besides avoiding rumor-mongering and self-delusion, the Berkshire playbook says to beware the delusions of others. Berkshire’s Vice Chairman, Charlie Munger, tells a story about fishing for muskies at Leech Lake in Minnesota. A visiting angler asked the local guide, “Are any muskies caught in this lake?”\n“More muskies are caught in this lake than in any other lake in Minnesota,” the guide replied.  “This lake is famous for muskies.”\n“How long have you been fishing here?”\n“Nineteen years,” the guide said.\n“And how many muskies have you caught?”\n“None.”\nSo the next time someone tells you of the untold riches being made in day trading, ask them, “How much cash have you banked?”","kind":null,"is_publish_news":true,"is_publish_highlight":true,"is_publish_live":null,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"","news_tag":"","news_rank":0,"symbols":[],"gpt_button":1},"commentList":[{"id":375670817,"gmtCreate":1619338903539,"gmtModify":1704722655666,"author":{"id":"3578313543552744","authorId":"3578313543552744","name":"ElginLow","avatar":"https://static.tigerbbs.com/44d66a2d7ac712e903ddee8420e88c27","vip":1,"crmLevel":5,"crmLevelSwitch":0},"htmlText":"Nice!&nbsp;","listText":"Nice!&nbsp;","text":"Nice!","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":1,"commentSize":1,"repostSize":0,"link":"https://ttm.financial/post/375670817","repostId":1171301745,"repostType":2,"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"comments":[{"id":4292353,"gmtCreate":1620736858172,"gmtModify":1680788130435,"authorId":3575934256983383,"author":{"id":3575934256983383,"authorId":3575934256983383,"name":"J355","avatar":"https://static.tigerbbs.com/bf4773397a05bfafd537c815b1b3cd0c","vip":1,"crmLevel":5,"crmLevelSwitch":0,"individualDisplayBadges":[]},"repliedAuthorId":0,"objectId":375670817,"type":1,"supId":0,"prevId":0,"content":"What is nice??","text":"What is nice??","html":"What is nice??"}],"langContent":"EN"},{"id":372505132,"gmtCreate":1619225335126,"gmtModify":1704721457754,"author":{"id":"3574952733525091","authorId":"3574952733525091","name":"MrPrickles","avatar":"https://static.tigerbbs.com/e63e0ef7358b29cf821c3b9a1d7939e7","vip":1,"crmLevel":1,"crmLevelSwitch":0},"htmlText":"Does anyone know if we can vote because we have&nbsp;$gme shares here??","listText":"Does anyone know if we can vote because we have&nbsp;$gme shares here??","text":"Does anyone know if we can vote because we have $gme shares here??","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":0,"commentSize":0,"repostSize":0,"link":"https://ttm.financial/post/372505132","repostId":1171301745,"repostType":2,"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"langContent":"EN"},{"id":376723716,"gmtCreate":1619150528935,"gmtModify":1704720433105,"author":{"id":"3578571985802325","authorId":"3578571985802325","name":"Deb87","avatar":"https://static.tigerbbs.com/257ee35464940d231ba8af4d8626f78b","vip":1,"crmLevel":2,"crmLevelSwitch":1},"htmlText":"Golden words!","listText":"Golden words!","text":"Golden words!","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":0,"commentSize":0,"repostSize":0,"link":"https://ttm.financial/post/376723716","repostId":1171301745,"repostType":2,"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"langContent":"EN"},{"id":376410316,"gmtCreate":1619141215635,"gmtModify":1704720248233,"author":{"id":"3561676944889444","authorId":"3561676944889444","name":"HappyTrade","avatar":"https://static.laohu8.com/default-avatar.jpg","vip":1,"crmLevel":5,"crmLevelSwitch":0},"htmlText":"Like?","listText":"Like?","text":"Like?","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":0,"commentSize":0,"repostSize":0,"link":"https://ttm.financial/post/376410316","repostId":1171301745,"repostType":4,"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"langContent":"EN"},{"id":376553242,"gmtCreate":1619138166086,"gmtModify":1704720172273,"author":{"id":"3581927793488898","authorId":"3581927793488898","name":"amazinggrace","avatar":"https://static.tigerbbs.com/101230c6fb2ec15140a58f9488ad7396","vip":1,"crmLevel":5,"crmLevelSwitch":0},"htmlText":"Good read, and a lot of wisdom in Warren’s actions. I always view buying stocks as being a part owner of a company, you only choose companies you believe in (which requires patience)","listText":"Good read, and a lot of wisdom in Warren’s actions. I always view buying stocks as being a part owner of a company, you only choose companies you believe in (which requires patience)","text":"Good read, and a lot of wisdom in Warren’s actions. I always view buying stocks as being a part owner of a company, you only choose companies you believe in (which requires patience)","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":0,"commentSize":0,"repostSize":0,"link":"https://ttm.financial/post/376553242","repostId":1171301745,"repostType":4,"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"langContent":"EN"},{"id":376523183,"gmtCreate":1619137737742,"gmtModify":1704720158284,"author":{"id":"3571366552189035","authorId":"3571366552189035","name":"tall_panda","avatar":"https://static.tigerbbs.com/66be38663e623770b428511ed0afc021","vip":1,"crmLevel":2,"crmLevelSwitch":0},"htmlText":"Good read","listText":"Good read","text":"Good read","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":0,"commentSize":0,"repostSize":0,"link":"https://ttm.financial/post/376523183","repostId":1171301745,"repostType":4,"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"langContent":"EN"}],"isCommentEnd":false,"newsSizeData":{"likeSize":153,"commentSize":89,"repostSize":0,"favoriteSize":1,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.24.2","shortVersion":"4.24.2","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/1171301745"}