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|Gold||+$2.60 to $1,212.70|
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Maybe the Answer is “Buy Foreign!”
I remember how popular those “What Would Jesus Do?” bumper stickers and T-shirts were a few years ago.
But right now, it seems like investors are asking a different question: “What Would Warren Do?”
If you haven’t guessed already, I’m referring to legendary investor Warren Buffett. His Berkshire Hathaway holding company sports a $360 billion market valuation, and it had a cash hoard of $62 billion as of the third quarter.
|Warren Buffett’s Berkshire Hathaway is sitting on $62 billion to invest.|
That’s a lot of scratch to put to work — triple the amount Buffett usually likes to maintain in reserve. Tomorrow is when he will release his annual shareholder letter, and many investors are wondering whether he’ll provide any clues about what he’s going to buy with it all.
That’s where this intriguing Reuters story comes in. It suggests a new Buffett strategy: Buy Foreign!
You see, the Oracle of Omaha is known for shopping when select assets are cheap. The collapse in the euro currency and the lousy economic growth the Continent has experienced have combined to make assets there as beaten-down as we’ve seen in a long time. Many are speculating that Buffett will go shopping overseas as a result.
He just bought Detlev Louis Motorradvertriebs GmbH, a motorcycle accessory retailer in Germany, for around $452 million. He also just told Fox Business that “We’re probably going to buy a small business in Europe … but I’d love to buy big ones.” And he said in an interview with German business daily Handelsblatt that he’s “definitely interested in acquiring more companies” there.
|“I’ve gone on the record recently saying foreign stocks and bonds are looking attractive again.”|
I’ve gone on the record recently saying foreign stocks and bonds are looking attractive again. That’s after a period of several quarters where I recommended staying away from most of them. It looks like Warren may be warming to those opportunities, too, so this could be a good time for you to study up on what’s available in markets like Europe, South America, and Asia!
What about you? Do you think Warren’s foreign investing push will pay off for him? Should you seek to ride his coattails? Or do you want to stick with a “Buy America” strategy? If you are looking at international opportunities, what countries or regions are you focusing on? Use the Money and Markets website to share intelligence and tips with your fellow investors.
|Our Readers Speak|
Negative interest rates? Paying borrowers to borrow money from you rather than the other way around? Sounds nuts, and many of you sounded off about it at the website.
Reader Clay B. said: “In my 60+ years of living, I’ve never seen the likes of what we’re seeing in many of the Euro (government) bond markets. With the recent announcement that the 5-year German government bond will pay a negative 0.08 percent to the holder, we’ve been ‘one-upped’ when it comes to the old expression about not losing money by burying it in a coffee can in the back yard.
“Yep, I always thought the only two things an investor had to worry about when buying a bond was the credit risk of the issuer (assuming the instrument was held to maturity) and the potential impact of inflation on future buying power. However, now we’ve seen a new level of investor insanity.”
Reader Jim B. said the mere existence of negative rates suggests a level of concern about the economy that investors may be under-appreciating. His take:
“On the surface, this would appear as a money safety net. In other words, the world’s economies’ outlook to some is so bad that they would rather lose a little than lose a lot. This doesn’t bode well for the five-year economic and stock market forecast expectations of those that have large sums of money that they want to protect.”
Another Reader Jim echoed that sentiment, saying: “The bond guys are the smartest investors. If they are willing to pay negative interest rates, it’s because they expect the value of that bond to rise. They see deflation in their futures.”
Thanks for the insights everyone. There is definitely an element of “paying for panic protection” behind this latest bout of bond buying. The deflation argument may hold merit, too. But I’m a guy who likes to call a spade a spade: This is just the latest asset class mania, following on the heels of manias in housing and dot-coms … and it won’t end well for many bond buyers!
Oh and just to correct the record on one issue that Readers Larry, David H., and Ray U. brought up:
Mr. Youngman’s real name was in fact “Henry,” as you can see in this Wikipedia entry and his New York Times obituary (which notes he was named Henry upon his birth in March 1906). He just went by the nickname “Henny.”
Well, it’s almost the weekend — and that means it’s almost time to hang up the keyboard for a couple of days. But I’d love to hear any more thoughts you have on negative interest rates, famous comedians, or anything else that’s on your mind. Feel free to use the website as your outlet when you have time!
|Other Developments of the Day|
The latest estimate of fourth-quarter GDP hit the tape this morning, and it turns out the U.S. grew at an annualized rate of 2.2 percent. That was down from the first guesstimate of 2.6 percent, but slightly better than economists expected. Strong consumer services spending helped the number, while our negative trade balance and weak government spending hurt growth.
I talked about negative interest rates on government bonds yesterday. Today, Bloomberg News posted a column by former Pimco bigwig Mohamed El-Erian on the phenomenon. Worth a read if you have time.
ISIS is reportedly attacking Christian communities in Syria, a move that led to multiple airstrikes from a U.S.-backed coalition of countries. Terrorists from the group have also been smashing priceless, ancient artifacts in Iraq.
I remember thinking the pearl-coated dress worn by Lupita Nyong’o at the Oscars was probably the most striking of any I saw. It turns out I wasn’t alone. The dress was reportedly swiped from the actress’ hotel room in Hollywood, a big heist considering its value is estimated at anywhere from $150,000 to a few million dollars!
Is economic growth all it’s cracked up to be? Is ISIS containable, through airstrikes or other tactics? And what the heck are you going to do with a million-dollar, famous dress if you are the thief? Pawn it? Wear it to a fancy dinner? Haha! Here’s the website link if you want to share your thoughts about these and other news items of the day.
Until next time,