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Stocks B / Berkshire Hathaway


Subject:  Re: Good times ahead? Date:  6/4/2020  5:18 PM
Author:  commoncents33 Number:  253529 of 259388

Without the Fed spending trillions on asset purchases, what would equity and bond prices be? I think that without the Fed action Berkshire Hathaway would be neck deep in elephants.

So what?

The Fed *did* do what it did, and that's the world we are in.

Yeah. Tricky situation.

Should time-proven value investors stick with time-proven methods? Or is it maybe actually "different this time"? If whatever-it-takes government intervention to prop up the stock market and zombie businesses is the new normal, how do we deal with that? On the other hand, maybe this is all end-stage-of-bubble stuff, and we'll find out that there's nothing new under the sun, and history does repeat itself.

A few things we need to remind ourselves, though:
1) Even if low interest rates "justify" high stock valuations, if buying at stocks at these very elevated valuations, your return will be pathetic compared to historical returns...unless you posit ever-increasing valuations. Essentially, over the past half decade or so we used a one-time elevate-the-valuation Monopoly card, but there's not a second card like that.
2) While the Fed can print money, it can't print wealth. Or jobs. So unless/until our underlying productivity as a nation improves, wealth won't improve. Again, money does not equal wealth or prosperity; it is only a medium of exchange.
3) Propping up zombie businesses and encouraging reckless behavior (e.g., airlines swapping debt for equity at the late stage of a business cycle to repurchase shares) will be damaging for the economic health of the nation. What we've moved to is the worst of socialism and the worst of capitalism, rather than the best of either.
4) Given the huge government obligations holes at every level...combined with generally increasing populist sentiment, it seems a near certainty that governments will soon increase their take on corporate profits.
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