Wednesday, May 18, 2016

Do Not Copy Big Names (for example, Soros and Buffett)

Two days ago the financial world was electrified by the news that George Soros, a famous investor, took a large long position in Barrick Gold (ABX), worth around $264 million. 

Well, I think that George Soros is by no means a model gold bug. Simply put, this guy is able to reverse any of its positions within minutes. It means that today Soros may be holding a large short position in Barrick. This guy is totally unpredictable. So, my advice is: Forget about Soros...

Since I am writing about Soros, let me put a short note on another famous investor, Warren Buffett. Or, better said, let me show this chart:

The chart shows the relative strength of Berkshire Hathaway (an investment vehicle run by Buffett) against the broad stock market, represented by the S&P 500 index. 
First of all, in the long-term Buffett has been stronger than the broad stock market (blue trend line). However, his strength is visible only during bear market in stocks (yellow areas). 
During bull markets an investor, holding any ETF tracking the broad stock market, would report better returns than Berkshire Hathaway (green lines). 

So the recipe looks like: 
Do not buy Berkshire Hathaway shares. During bull markets in stocks be invested in any ETF tracking the broad stock market. During bear markets...hold cash.

And now relax and watch the market reaction to the FED minutes.

By the way, I recommend the last report on the U.S. economy, published by two American economists, Van Hoisington and Lacy Hunt.
According to these gentlemen, the U.S. economy is not ripe for any rate hikes. Quite contrary...


  1. blogger Jeff Miller, aka 'oldprof', is a writer I respect.

    This post of his is relevant: