“Warren, I just want to absolve you from any worries. You’re going to fail. And the reason you’re going to fail — my daughter may starve to death and you’re going to fail, but I’m not going to blame you because it’s because the Democrats are in and they’re all Communists.”
– William Hertzog Thompson, Warren Buffett’s Father-in-Law, Circa 1951
Inflation and Conflation
There was a recent news item that caught our eye, presenting a valuable opportunity for Great Investors to learn something instructive.
You may have seen in the news that the president recently posted a tweet criticizing Federal Reserve Chairman Jerome Powell. Trump stated that the Federal Reserve should cut interest rates and added that Powell’s termination “couldn’t come fast enough,” implying he might fire the Fed Chairman. It would be highly unusual for a president to fire a Federal Reserve Chairman, so the stock market reacted strongly, dropping about 3% in one day due to this tweet.
The very next day, Trump clarified in an interview that he had no intention of firing Powell, describing his earlier statement as hyperbolic, but reiterating that it’s a perfect time to lower interest rates. The stock market then rose by 3% that day, recovering the previous loss.
I see two important lessons from this event, which I call “inflation and conflation.” The first lesson examines the outlook for inflation and Trump’s call for lower interest rates, evaluating whether this is an appropriate approach. The second lesson addresses the risk of conflating our politics with our investment policy.
In our latest Habits of Great Investors video, we discuss these topics and the dangers of allowing your politics to influence your investment strategy. Importantly, we also offer new insights on how a true long-term equity investor can use this time as an opportunity to prosper.
Download the Article
To download our video article, click here.
Helping those you care about
The purpose of our Habits of Great Investors series is to help you become an outstandingly successful investor by following the principles of patience and discipline, which are required to prosper as an equity investor. No doubt, “Mr. Market” periodically tests that patience and discipline by subjecting investors to emotional swings that can cause many to make a big mistake. It is only those who faithfully adhere to a rock-solid investing philosophy who will pass those tests.
Successful investing can be simple, but not easy. If you have a family member, colleague, or friend who perhaps has not fared as well recently and could benefit from our advice, we’d appreciate an introduction. We enjoy working with you and would love to provide the same planning and service to those you care about.
Save the date for our next “Great Investors LIVE” event on August 1st
On August 1st, we will deliver a brief talk summarizing our outlook on current events, delivered in the same style you have come to appreciate in this article series. We will then have ample time for Q&A and discussion to address any additional questions you may have. You are more than welcome to bring a friend or family member!