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Buffett Still Buying Stocks, Sees 'Good Value'
Warren Buffett still sees "good value" in stocks, even as the Dow Jones Industrial Average approaches an all-time high.
On CNBC's Squawk Box, Buffett said Berkshire Hathaway is still buying stocks, even though prices have increased.
He said stocks are not "as cheap as they were four years ago" but "you get more for your money" compared to other investments. He added, "The dumbest investment, in my view, is a long-term government bond."
Buffett has "enormous respect" for Federal Reserve Chairman Ben Bernanke, but thinks it will be interesting to see what happens when the Fed begins to unwind its efforts to keep interest rates very low. He said that rates near zero have pushed stocks higher than they would have gone otherwise and the global markets are on a "hair trigger," looking for any sign the central bank may start raising rates.
"I think the Fed will try to give little signals here and all of that. But in the end, there are an awful lot of people who want to get out of a lot of assets if they think the Fed is going to tighten a lot."
The results of higher rates, he said, "will be very noticeable" in the markets. While stocks will be hurt by higher rates, Buffett said other investments will also be affected and he still thinks equities are the best thing to buy now.
Stock brokers and clearing members might get some relief in margin payment to the National Stock Exchange (NSE), in case their mark-to-market (MTM) gets triggered after a major market crash. The NSE has introduced a T+0 (Today) settlement scheme for its members allowing them to pay the margin on the next day of trading, at 8:30 am, before the market opens. This will save them around 20-25 per cent on scale-up margin requirements in case MTM gets triggered.
MTM is triggered during a sharp fall in the price of a security when the initial margin collected by the exchange is not sufficient to make good the crash in price. In such cases, clearing members of NSE are supposed to deposit their margins before 10:30 am but along with 25 per cent extra or scale-up margin. NSE now says if margin payment is done before the market opening, such a scale-up margin might not be required. The margin paid after the market opens on the next day of trading is considered a T+1 settlement.
The investment ideas of Warren Buffett is most basic and simple to implement. The beauty of his investment ideas is that they are so easy and logical that at timespeople overlook the same ideas even though it must have crossed their mind. These investment ideas of Warren Buffett has not only help the maestro to make billions but also stands as a guiding principles for every other investor of this world.
Warren Buffett’s investment ideas asks us to buy stocksof only those companies whose “fundamentals” are very strong and its stock is available at “undervalued price”. When we say strong fundamentals we mean a healthy financial report, unique product line which is run by exceptional managers.
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