Fear: Your Best Friend
In his February letter to Berkshire Hathaway shareholders, Warren Buffett had this to say about the business of investing:
[T]umbling markets can be helpful to the true investor if he has cash available when prices get far out of line with values. A climate of fear is your friend when investing; a euphoric world is your enemy.
This is what makes Argentina so interesting right now… and the US less so.
Here’s how we put it on Friday in our bonus letter to paid-up Bonner & Partners subscribers, The B&P Briefing:
Whatever your long-term view of the health of the US economy is, the “End of America” thesis so far has not panned out.
Today, it’s the rest of the world that looks weak compared to the US, not the other way around.
That doesn’t mean we should expect the US stock market to deliver strong long-term gains from here on in. There are plenty of pockets of opportunity. But a trailing P/E for the S&P 500 of 19.5 and a Shiller P/E of 26 do not bode well for investors.
Market history tells us that when the sun shines brightest, investment returns are the lowest. And when dark clouds are gathering, investment returns are the highest.
So, is it time to buy Argentine stocks?
We agree with Rob. Things are bad there. But they are likely to get a lot worse before they improve.
And as you can see from the chart below, the Argentine stock market is a falling knife.
For now, concentrate on building up your cash position. Argentina is shaping up to be a fantastic long-term buy.
P.S. Here’s that link again to pick up your FREE copy of The New Empire of Debt. All we ask is you cover shipping costs.