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How long?


Alekbaylee
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Hi folks,

 

In your opinion, how long will it take for the US/world economy to get out of this whole mess and starts expanding again?

 

1-2 years

2-5 years

5-7 years

7-10 years

 

I know it depends on multiple factors, but let's just keep it simple...

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I don't know, and I don't think anyone can really know (there are really smart people with all kinds of opinions on this).

 

Best to keep doing what has shown to work: Buy good businesses cheaply, make sure they have solid balance sheets and perform well even in tough times.

 

Historically, things usually start to turn around when everybody starts believing they won't, but who knows when that point will be reached...

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I don't know, and I don't think anyone can really know (there are really smart people with all kinds of opinions on this).

 

Best to keep doing what has shown to work: Buy good businesses cheaply, make sure they have solid balance sheets and perform well even in tough times.

 

Honestly I think this type of thinking is counter productive. One can understand that no one knows the future, but its not wise to simple ignore it inmo. This sort of thinking allows one to do just that. Jim Rogers, Prem Watsa, and Michael Burry have shown that understanding how events will play out can be very useful to investing.

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Honestly I think this type of thinking is counter productive. One can understand that no one knows the future, but its not wise to simple ignore it inmo. This sort of thinking allows one to do just that. Jim Rogers, Prem Watsa, and Michael Burry have shown that understanding how events will play out can be very useful to investing.

 

Indeed, but hindsight is 20/20. What if this time Buffett and Munger are right?

 

You can win with macro bets, but there are so many variables, so many potential black swans (negative and positive), that it's still just a gamble, and the people who turn out to be right are hailed as geniuses and those that are wrong are mostly forgotten. It doesn't mean the people who were right aren't geniuses, but it can mean that other geniuses were wrong..

 

As Buffett says, if every time things became uncertain and the future seemed cloudy people retreated, nobody would have ever bought anything during the 20th century because you're always just coming out of a crisis and there's always a crisis on the horizon. It's the normal state of things.

 

Now, that doesn't mean that I believe the economy will grow or we won't have a double dip and all that. I don't know. It just means that I try to build my portfolio so that it does ok whatever happens, rather than making a big bet on one outcome or the other and risking being wrong.

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The goal should be to improve your train of thought and analysis. Not to forsake the whole damn thing. If Buffett was Japanese.....

 

Im fully invested, but Macro matters. The more I work at it the better understanding I have.

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The goal should be to improve your train of thought and analysis. Not to forsake the whole damn thing. If Buffett was Japanese.....

 

Im fully invested, but Macro matters. The more I work at it the better understanding I have.

 

Well, maybe my initial answer gave you the wrong impression. I dont' live in a cave with stacks of 10Ks, avoiding everything about the outside world.

 

I follow macro a fair bit, and try to analyze it. I just haven't felt the need to use that information to rejig my portfolio, because it feels like it's mostly a red herring, and I feel like the times that I was tempted to do it in the past, if I had actually done it, I would probably be worse off now.

 

In short: Macro matters. I just doubt it's a very useful tool to actually make investment decisions most of the time (there are exceptions of course, and they get all the press, while on the other side all the money lost because of wrong macro decisions will never have books written about it, so there's sample bias).

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Nobody knows. We can be optimistic or pessimistic but we can only guess. Even the greatest minds can be wrong - who would have predicted what happened in 2001?

 

I usually stay fully invested. When the a$$ drops out its hard on the stomach and hard to sleep. But if you get out, when do you get back in? I have been caught on both sides of this over the years.

 

Sometimes you can take a reasonable guess at how things will work out in the near future - for instance there are some prices that are starting to look attractive due to the children playing in Washington. One hopes that the markets will have a little bounce when that settles.

 

Of course the question presupposes that the world economy will become healthy again, but we have to think that way don't we?

 

 

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Guest Hester

I think this credit crisis has given many value investors a false sense that they now need to spend a portion of their time on macro topics.

 

Nobody should ignore the macro, but being anything but agnostic towards it I think is delusion, especially over time and with dealing with large macro issues more so (interest rates or the global economy, as opposed to the direction of lower tranches of subprime real estate).

 

There's a difference between preparing yourself, and structuring your portfolio in a way that could survive a wide range of economic scenarios, and fooling yourself into thinking you actually know what is going to happen to the economy over the next 5 years.

 

So I guess I'm saying the only answer to this question is I don't know.

 

To paraphrase Buffett, don't predict the tide, just swim as hard as you can.

 

 

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