Once again Buffett has created his own Good luck and is in the right place at the right time with the pencil case to the brim. That’s right, right before his eyes has appeared a magnificent wild elephant that had no intention of being hunted, but which circumstances have forced into the crosshairs of Buffett. It’s called Nationwide and has meant that, at the age of 76, the old hunter still has the same sparkle in his eyes as when he shot M&T; Bank o Wells Fargo, all of which belong to the same sector.
This subprime-crunch The situation we are currently experiencing will ruin many, but it also presents a historic opportunity for those who know how to seize it, whilst others flee in terror and panic towards the refuge of a triple-A sovereign rating, even if it is at the cost of a yield derisory.
The Master Warren Buffett, once again, it shows the way forward. It is the most responsible and interesting of the options. If Nationwide It is a valid option, but investments in fixed-income securities not linked to mortgages are just as valid, if not more so subprime, from both non-financial and financial sectors. We currently have A-rated corporate debt and AA well below par, even below 90, with yields more than just interesting. In other words, genuine opportunities in the fixed-income market that are visible only to a select few with foresight.
Unfortunately, most average investors continue to focus solely on stock market indices. They even use the equity market as a yardstick to gauge the severity of the current credit crisis. Fortunately, however, the Economy with a capital ‘E’ is not just the stock market, but much more besides. The state of the economic system may worsen or improve with little regard to what happens to the indices of the DJ, DAX o FTSE. There is no doubt that these markets will ultimately reflect the System’s true state of health, but focusing solely on them It’s like watching the faces in the crowd instead of watching the match.
Anyway, as he says Rebuzner in his latest post, these days it’s all the rage to talk about chaos and stars widespread. Meanwhile, other Masters are going about their business, which, once again, benefits us all.