October 3, 2022
If you're a hedge fund, or trader, and you're leveraged 10, 20, 50, 100 times, avoiding corrections or trend changes is critical to your survival.
Getting it wrong, can mean your portfolio blows up and maybe goes to zero. That's the mentality the media is speaking to, and frankly much of Wall Street, when addressing any market decline.
The bottom line: 99.9% of investors aren’t leveraged and shouldn't be overly concerned with U.S. stock market declines, other than saying to themselves: “Do I have cash I can put to work at these cheaper prices? And, where should I put that cash to work?”
So, for the average investor, dips are an opportunity to buy stocks at a discount.
On that note, Warren Buffett has made a career out of "being greedy, while others are fearful."
And there is certainly a lot of fear in the air.
With that, Buffett's successor, Greg Abel, was in buying Berkshire Hathaway shares last Thursday. He bought 168 shares, at an average price of around $406,000 a share. That's over $68 million worth of stock.
Based on Forbes' estimate of Abel's wealth, that's about 15% of his net worth.
This purchase came the day after the Bank of England intervened to calm the UK bond market.
If we look back through history, major turning points in markets have often been the result of some form of intervention (i.e. policy action or adjustment).
For the vulnerable government bond market, the action taken by the BOE has done the trick, thus far.
Yields on 10-year UK gilts are down 65 basis points from Wednesday's high, back under 4%.
U.S. yields are down 38 basis points. And here's a look at what has been the most imminently dangerous major global government bond market, Italian yields (down 73 basis points from Wednesday's high) …