Are we going to have deflation or hyperinflation? Should we sell our stocks or buy more?
Hi, I am Henrikh and we are going to understand what we should do with our portfolio in this volatile economy. Will the market melt down or go up? We know many significant economists that understand what's going on in the economy. And I love them. I can't imagine my life without listening to their speeches. I really enjoy listening to the economic forecasts of giants like Robert Kiyosaki, James Rickards, Peter Schiff, Mike Maloney, Richard Duncan, Andy Tanner, Ken McElroy, Ray Dalio, G. Edward Griffin, Chris Martenson, Harry Dent, Garett Gunderson. I still can continue naming them, but let's stop here and ask ourselves. Do they all see the future of the economy the same way? Absolutely not. And instead, they all forecast the future of the economy differently. Yes, if we have a question like deflation or hyperinflation? Some of them will tell deflation and some of them: Hyperinflation. They are such unique individuals that even some of them say that we will have both deflation and hyperinflation at the same time.
So then you might be thinking: I'm an investor, I am not a professional economist. Then whom should I listen to understand whether to sell my stocks or buy more? Right? Wrong. Didn't you just agree that you are an investor and not an economist? Then why are you trying to predict the economy? Are you buying businesses, or are you buying an economy? If you are an investor, you should be buying companies, not the economy. That's it. My advice is to listen to all of them. When those people talk, people listen to them. But that doesn't mean you should sit on 100% cash or equity. If you are an investor, listen to investors like Warren Buffett, Charlie Munger, Benjamin Graham. They usually don’t try to forecast the economy. What did Benjamin Graham write in his book "The Intelligent Investor"? Did he write that when there is a threat of deflation, then sell all your stocks? No. Absolutely not. Instead, he wrote to have 25-75% of your portfolio in stocks and the other 25-75% of your portfolio in bonds. And do you know why?
Because Benjamin Graham knows well that nobody can time the market.
I will tell you about an indicator that shows whether to sell stocks or buy more. And that indicator is the bargain. If you see many bargains, then invest in those stocks more than in bonds. If you see a wonderful business with strong fundamentals being sold cheaper than its real value, and you are sure that the business will have a big success in the long run, then buy the shares regardless of your economic expectations in the short run. But if you are having real difficulties in finding bargains, that's an indicator of an overpriced stock market. Then go for cash or bonds mostly. That’s simple. Don’t make simple things complicated.
But you’d better stay within the 25-75% ranges. Yes, sometimes, you can exceed these limits, but that should be in extreme cases. I think that kind of opportunity arises once in a decade or two. Currently, I have very few companies in my portfolio, as I think there are not many bargains in the market, so does Warren Buffett and that's why he has almost $150 billion in cash. Not because he thinks the economy will collapse, but because he doesn't see many bargains in the market. We act as an investor, not as an economist or a futurist. We don't overpay for the businesses because there is still hyperinflation to come.
So focus on the businesses, not the economy. And learn history. There is no clear correlation between the stock market and the economy. There have been too many divergences between them in history. The stock market moves based on too many variables, and some of them are the emotions, beliefs, and future expectations of the investors, not the actual economy itself.
Let's be clear. I don't claim the economy has absolutely nothing to do with the stock market. Surely both the economy and the stock market are based on businesses. But one is based on reality, and the other is based on the imagination of investors. So that's why they are not that correlated. But yes, you should have some idea about the economy and your approach can have an impact on your portfolio, but you should not give high importance to that. You are not an economist; you are an investor who buys businesses. Even if you are an economist, why should you be sure about your predictions when the greatest economists mentioned earlier firmly believe in opposing outcomes. Where should your confidence come from? Even though many things are still depending on the government, decisions still have to be made.
Don't be a victim of the stock market, while trying to forecast the economy. An intelligent investor is one that is prepared for all directions. Don't bet on something with all your wealth. I will only bet on some businesses with all my wealth if the prices drop by 80%. But that happens once in a decade or two, and that's about the times I was describing earlier that you find bargains everywhere. So again, that will be a focus on businesses, not the economy.
Are we going to have deflation or hyperinflation? Should we sell our stocks or buy more?
Hi, I am Henrikh and we are going to understand what we should do with our portfolio in this volatile economy. Will the market melt down or go up? We know many significant economists that understand what's going on in the economy. And I love them. I can't imagine my life without listening to their speeches. I really enjoy listening to the economic forecasts of giants like Robert Kiyosaki, James Rickards, Peter Schiff, Mike Maloney, Richard Duncan, Andy Tanner, Ken McElroy, Ray Dalio, G. Edward Griffin, Chris Martenson, Harry Dent, Garett Gunderson. I still can continue naming them, but let's stop here and ask ourselves. Do they all see the future of the economy the same way? Absolutely not. And instead, they all forecast the future of the economy differently. Yes, if we have a question like deflation or hyperinflation? Some of them will tell deflation and some of them: Hyperinflation. They are such unique individuals that even some of them say that we will have both deflation and hyperinflation at the same time.
So then you might be thinking: I'm an investor, I am not a professional economist. Then whom should I listen to understand whether to sell my stocks or buy more? Right? Wrong. Didn't you just agree that you are an investor and not an economist? Then why are you trying to predict the economy? Are you buying businesses, or are you buying an economy? If you are an investor, you should be buying companies, not the economy. That's it. My advice is to listen to all of them. When those people talk, people listen to them. But that doesn't mean you should sit on 100% cash or equity. If you are an investor, listen to investors like Warren Buffett, Charlie Munger, Benjamin Graham. They usually don’t try to forecast the economy. What did Benjamin Graham write in his book "The Intelligent Investor"? Did he write that when there is a threat of deflation, then sell all your stocks? No. Absolutely not. Instead, he wrote to have 25-75% of your portfolio in stocks and the other 25-75% of your portfolio in bonds. And do you know why?
Because Benjamin Graham knows well that nobody can time the market.
I will tell you about an indicator that shows whether to sell stocks or buy more. And that indicator is the bargain. If you see many bargains, then invest in those stocks more than in bonds. If you see a wonderful business with strong fundamentals being sold cheaper than its real value, and you are sure that the business will have a big success in the long run, then buy the shares regardless of your economic expectations in the short run. But if you are having real difficulties in finding bargains, that's an indicator of an overpriced stock market. Then go for cash or bonds mostly. That’s simple. Don’t make simple things complicated.
But you’d better stay within the 25-75% ranges. Yes, sometimes, you can exceed these limits, but that should be in extreme cases. I think that kind of opportunity arises once in a decade or two. Currently, I have very few companies in my portfolio, as I think there are not many bargains in the market, so does Warren Buffett and that's why he has almost $150 billion in cash. Not because he thinks the economy will collapse, but because he doesn't see many bargains in the market. We act as an investor, not as an economist or a futurist. We don't overpay for the businesses because there is still hyperinflation to come.
So focus on the businesses, not the economy. And learn history. There is no clear correlation between the stock market and the economy. There have been too many divergences between them in history. The stock market moves based on too many variables, and some of them are the emotions, beliefs, and future expectations of the investors, not the actual economy itself.
Let's be clear. I don't claim the economy has absolutely nothing to do with the stock market. Surely both the economy and the stock market are based on businesses. But one is based on reality, and the other is based on the imagination of investors. So that's why they are not that correlated. But yes, you should have some idea about the economy and your approach can have an impact on your portfolio, but you should not give high importance to that. You are not an economist; you are an investor who buys businesses. Even if you are an economist, why should you be sure about your predictions when the greatest economists mentioned earlier firmly believe in opposing outcomes. Where should your confidence come from? Even though many things are still depending on the government, decisions still have to be made.
Don't be a victim of the stock market, while trying to forecast the economy. An intelligent investor is one that is prepared for all directions. Don't bet on something with all your wealth. I will only bet on some businesses with all my wealth if the prices drop by 80%. But that happens once in a decade or two, and that's about the times I was describing earlier that you find bargains everywhere. So again, that will be a focus on businesses, not the economy.
