Buffett about the stock market

In an annual letter to shareholders, the legendary investor Warren Buffett formulated the state of stock markets. He wrote that today the behavior of the markets can be compared to the casino, and this was not the case when he was young.

Buffett’s strategy is well known: before investing in stocks, he studied the company’s performance in detail, identifying strengths and weaknesses, and deepened into production problems. This is what he calls the work of the investor - to do, first of all, the company, and the stock is considered a piece of paper describing this company.

However, much has changed over the past decade. Stock markets have become dominated not by investors, but by speculators, that is, traders interested in quick earnings. 

Stocks have become increasingly distant from companies. Of course, there is a dependence, smart reports on indicators and characteristics are regularly published, but decisions of traders are increasingly made based on the general behavior of the market. 

At Buffett it is customary to divide all traders into investors and speculators. It would seem: from the point of view of stock trading - these are the same. However, the investor is interested in the activities of the company whose shares he owns. Buffett is known for personally meeting with company managers, attending shareholders meetings, and understanding business processes. In fact, this is Buffett’s signature style, which brought him success and made one of the richest men in the world.

Speculators are interested in quick earnings. They are focused exclusively on stock trading. Their task is to buy at a minimum, to sell at a maximum. It is the predominance of speculators that makes the market more uncertain and casino-like.

I am not inclined to judge speculators - it is their right to earn the way they do without hurting anyone.

We just need to understand the realities of what is happening and accurately assess the logic of events.

#BuffettInsights #MarketShift #InvestorMindset #SpeculatorSurge #MarketRealities