Latest! Buffett's letter: “A drop of more than 50% is also possible”
Hello, this is Gesan Shimoyama.
'Buffett finally moves from feature phone to smartphone!'
Last month, such news spread,
and just graduating from a feature phone became worldwide news (laughs).
As expected.
Among people who switch from feature phones to smartphones and make news,
worldwide, perhaps only Buffett.
He was reportedly convinced in person by Apple’s CEO Tim Cook
and started using the iPhone.
However, even if he says he started using an iPhone,
apparently he is only using it for calls.
'Then the feature phone would have been fine,' I also think.
One thing I notice is that in the world of investing,
technologies show an overwhelming presence, such as high-frequency trading (HFT),but
the world’s top investor Buffett
does not even utilize the iPhone.
In the world of investing, the power of technology cannot be ignored, but
no matter how the era changes, the essence of investing remains unchanged,
and even without utilizing technology, there are ways for investors to continue winning.
There are still ways for investors to win without using technology.
In fact, I still trade
without relying on charts or fundamentals while continuing to profit,
even using a feature phone.
When looking around the world, many individual traders
wield unbelievably complex and difficult
algorithms to trade.
From my perspective,
'Why bother choosing such a difficult path?'
I often wonder.
If you can win with that, that’s fine,
but choosing overly complex algorithms
and not just increasing capital but often wiping it out in crashes like the one recently,
is very unfortunate.
Humans tend to be bound by the belief that 'you can’t make money unless you do something highly complex,'
and many are drawn to advanced theories,
which isn’t hard to understand,
but if you are bound by that thinking,
please recognize that the reality is the opposite.
Buffett has
'not over the high hurdles, but finding low hurdles.'
It is famous that in order to win in investing
what is needed is
'not to be able to do hard things' but to be able to do easy things well.
What matters is
'how easily can you generate profits'
and pursue that.
By the way, the methods I teach in the Stock Academy are
'so simple that you’ll be surprised, '
and you’ll wonder, 'Is this really okay?'
Because the rules are simple and the hurdles are low,
anyone, regardless of talent or experience, can continue to win.
However, unfortunately some people
cannot quite grasp this.
Because the rules are so simple,
some people look at the strategy and think, 'This can’t possibly work.'
There are those who spread suspicion about it as they enroll in Stock Academy.
Even after joining in belief,
there are also those who study with lingering doubt
until they actually see profits.
Hearing such words is very disappointing,
and makes me feel sad and frustrated.
Because this method is very important to me,
I want to emphasize that.
Perhaps,
'the feeling of having your child criticized'
is a good way to describe it.
If your own child is criticized,
no parent could stay unmoved, and
I too, consider investment strategies to be like a child,
and if they are harmed, nothing is more frustrating.
In any case, to win in trading,
you do not need to confront difficult theories,
but rather to adhere stubbornly to simple, rational rules
and those who do so can keep smiling in the world of investing.
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I expect more than 50% crashes.
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Now, Buffett is famous for
the annual
'Letter to Shareholders'
which was released last month.
↓
https://www.berkshirehathaway.com/letters/2019ltr.pdf
Have you read it?
As a trader,
it is indispensable material,
so it would be good to take a look.
That said,
'it's in English and a hassle to read'
is what many might think,
so for individual traders
I will pick out and introduce a passage that I found meaningful.
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But the combination of The American Tailwind,
about which I wrote last year,
and the compounding wonders described by Mr. Smith,
will make equities the much better long-term choice
for the individual who does not use borrowed money
and who can control his or her emotions.
【Translation】
However,
if you combine the American tailwind I wrote about last year
with the threat of compounding described by Mr. Smith,
for an individual investor who does not borrow money
and who can control emotions,
stocks will be a much better long-term choice.
'To the Shareholders of Berkshire Hathaway Inc.:'
https://www.berkshirehathaway.com/letters/2019ltr.pdf
P.11 quote
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Buffett
has a strong, bullish view on the American stock market.
“If you don’t borrow money and you can control your emotions,
over the long term it will be a good choice,”
he advises individual investors.
However, in fact,
before that, the following passage exists.
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Anything can happen to stock prices tomorrow.
Occasionally, there will be major drops in the market,
perhaps of 50% magnitude or even greater.
【Translation】
Tomorrow, anything can happen to stock prices.
Sometimes there will be major declines in the market,
with a magnitude of 50% or more.
'To the Shareholders of Berkshire Hathaway Inc.:'
https://www.berkshirehathaway.com/letters/2019ltr.pdf
P.11 quote
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As written, Buffett expects a crash of more than 50%.
'Even if it falls more than 50%, if you don’t invest borrowed money and you can control your emotions,
long-term investing is a good option.'
What do you think?
It is simple, but a highly valuable piece of advice that no one can deny.
Are you prepared for a scenario where stock prices fall by 50%?
What I want to emphasize here is
this part.
In my case, I trade with the premise that
even if a company goes bankrupt and its stock price drops to zero,
I will be fine.
So, from now on, I am confident that I can remain in the market without a hint of doubt.
How about you?
For example, can you imagine the Nikkei Average dropping to 10,000?
Would you be able to survive?
Whether it actually happens is unknown to anyone.
However, as long as there is even a 1% possibility,
ignoring it and trading would be unacceptable,
so please engrave this in your mind.
Perhaps most people think,
'50%? No way.'
If you are one of those who think that,
the moment that “no way” becomes reality, you will lose everything.
So please enjoy reading to the end today as well.
Thank you for reading.
Keizo Shimoyama
