Warren Buffett’s Latest Wisdom

One thing we look forward to every year is Warren Buffett’s annual letter that comes out in February. Here is more sage long term investing advice from the Oracle of Omaha.

Moreover, the years ahead will occasionally deliver major market declines – even panics – that will affect virtually all stocks…During such scary periods, you should never forget two things: First, widespread fear is your friend as an investor, because it serves up bargain purchases. Second, personal fear is your enemy. It will also be unwarranted. Investors who avoid high and unnecessary costs and simply sit for an extended period with a collection of large, conservatively-financed American businesses will almost certainly do well.

We, at Blackthorn, as Registered Investment Advisors, have a fiduciary obligation to our clients. We are very conscious of high and unnecessary costs and how they drive down our clients returns. Patience, discipline, a well thought out investing plan and low costs. Do yourself a favor and ask your advisor to explain any and all fees that you pay. Mutual fund fees, 12b-1 fees, Brokerage fees, Investment management fees, and Wrap fees are all examples of unnecessary fees and costs.  If you are using a broker and they cannot easily and transparently list and explain your fees and costs to you then move on to someone who has a fiduciary obligation to you.

Beware the Ides of March is what you will be seeing all week in the investing media headlines. March 15th is fraught with stumbling blocks this year. A Dutch election is scheduled for this week which could move markets. More importantly, the Federal Reserve is meeting and March 15th is the day we reach a debt ceiling deadline here in the United States. The Federal Reserve will be meeting and they seem to be boxed in a corner. Rate hike odds according to Bloomberg are pushing 90%. This is the key move we have been highlighting for 2017. If the Fed does not raise rates markets may soar even higher as retail investors and animal spirits push into the market. If the Fed does raise rates it could pour some cold water on investors and slow the rally.

Retail investors are pouring into ETF’s as shown by the fact that the SPY had its largest inflow since 2014 this week and its second largest daily inflow since 2011. As per a report from CNBC company insiders are dumping stock into the marketplace at accelerated rates. For the moment caution must be heeded. Wall Street lore suggests that the third rate hike is when markets start to falter. A rate rise in March 15th would be the third rate rise of this cycle with the stated goal of two more rate hikes in 2017. History rhymes. It does not repeat. It could be different this time as we are starting from such a low level. For now, momentum is with the bulls but if retail investors are in charge things could change very quickly.

Stocks are still extremely overbought but this week they showed some slowing in their ascent. Stocks have run a long way and should stop to rest and acclimate to their new elevation. Finally, this week we saw a close in the S&P more than 1% away from its previous close. We have now not seen a move 1% lower in over 90 sessions.  Animal spirits are running high as retail investors are pouring into ETF’s like the SPY. We continue to be wary of market structure and overreliance on ETF’s. Late day marches higher in SPY are being blamed on retail buyers late to the party. Know what you own. No pushback on the idea that Germany should leave the Euro. Need to follow that one further down the rabbit hole.

I think we aspire less to foresee the future and more to be a great contingency planner… you can respond very fast to what’s happening because you thought through all the possibilities, – Lloyd  Blankfein

To learn more about us and Blackthorn Asset Management LLC visit our website at www.BlackthornAsset.com .


A pessimist sees the difficulty in every opportunity; an optimist sees the opportunity in every difficulty. – Winston Churchill


Disclosure: This blog is informational and is not a recommendation to buy or sell anything. If you are thinking about investing consider the risk. Everyone’s financial situation is different. Consult your financial advisor.


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