HOW I SEE IT – by Bruce

 

Correction low? /Rolling bull markets/Leveraging end

Back from vacationing in Greece. Amazing trip. Recommend it.

I did watch Berkshire Hathaway AGM - some of it live and some recorded- all through CNBC. Always a great meeting -been attending or watching it for 20+ years. Nice to see equity rally in the last few weeks. I commented on a possible low 2 weeks ago when the Dow corrected 5%.

Positives:  

AAII Investment Sentiment Survey- 40.8% bullish/ 35.4% neutral/ 23.8% bearish - lowest bearish reading in months- bulls not over 50%. Great confidence.

Some of my favorite Buffet comments from meeting:

“I hope to come next year.’ We all do.

“If you’re lucky in life, make sure a bunch of other people are lucky too.” He received a standing ovation.

Buffett praised fed Powell for his work at the Fed for the last few years. Called him a very wise man.

He asserted that he and Charlie Munger certainly missed investment opportunities over the years, but only regretted a select few. 

Decisions will eventually fall to Greg Abel. He sat beside Warren on stage. He was very impressive.

Berkshire success is not paying a dividend and using its capital in more profitable ways. He can also do buybacks.

Berkshire cash at record high of $188 billion- getting close to $200 billion.

They are watching renewable energy.

He teased of a possible Canada investment.

Charlie Munger - truly honest -the architect of Berkshire.

Worries about AI scamming- could be the next growth industry - lichen technology to nuclear weapons.

US debt will be acceptable for a long time due to dollars reserve currency status.

RBC Global Insight, US labor market - evidence of cooling labor market momentum has put two interest rate cuts from the Fed back to discussions.

Dr. Ed Yardeni, “We don’t expect any recession this year that the Fed would have to address by easing. But since some investors think that may happen, the Fed Put is back. With it increased risk of a stock market melting up. Almost everything’s coming up Roses. Investors in both stock and bond markets are suddenly blooming with optimism. Positive employment report. Interest rates won’t be kept higher for longer after all. Both good and bad news are being met as great news. One fact that indeed warrants optimism, the Feds 2% inflation target has been reached by one relevant measure.”

Bank of America says, “Don’t sell in May and go away.”

Tom Lee, “Says the bar is lower for the Fed to cut and so stocks are set to do quite well. Buy in May. Economy no longer seems red hot given softer April jobs report and March JOLTS. That is dovish relative to market views and pushback against the ideas of hikes and stagflation. Q1 2024 season strongest since 2021. S&P 500 -4% decline in April elevated overbought conditions resetting risk reward. Investors deleveraging in April included one of the largest ever Tax Day withdrawals of money market funds.  Oil has taken a huge tumble. 10-year yields of dropped. VIX at 13. Tons of dry powder. Lots of top callers. Earnings - 78% beat.”

Negative: 

As I mentioned, Warren Buffett is very cautious on AI - He mentioned he saw a video of himself making comments and he never did it - IA did it. So, watch the rise of disinformation. Brian Wesbury, “If the Fed is going to be successful on inflation, it’s going to need a monetary policy that’s tight enough to hurt real economic growth as well. That should scare the stock market and yet the stock market as a whole remains lofty relative to interest rates and profits. This only makes sense if investors believe the Fed will be able to react quickly to economic weakness once it kicks in without raining inflation. Count us skeptical.

Investment strategy: “I buy on the assumption they could close the market the next day and not reopen it for five years.” Warren Buffett.

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Have a great weekend! Bruce