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Why it is Time for Investors to Buy! Buy! Buy!

July 29, 2023

This chart of the US S&P 500 index helps explain why Warren Buffett is so rich. He started investing, with leverage, after the Second World War and is famous for his buy and hold approach to investing. His mother could not have given birth to the wizard investor at a better time, ahead of a bull market in US stocks that just runs and runs - and, almost certainly, isn't finished yet.

We can look at a shorter term chart and what we see is a new buy signal. This is telling us that this long running bull market is off on another leg. Charts are good at cutting through all the feverish analysis and expert opinions with which investors are buffeted from every direction. There are always a million opinions out there but only one chart and that chart says buy.

You can choose to disbelieve, pour over the weighty ruminations in your favourite financial newspaper but if you just believe in my chart indicators and act accordingly it makes life very much easier.

The index looks like this because many stocks look like this. One option is to buy every 3G stock with a chart broadly on these lines - a strong uptrend and a recent buy signal. But I am focusing more on the story. I want a great story but I also want a stock that is walking the talk.

In the late 1990s when there was a crazy bubble around the Internet part of the madness was that many stocks had a story but they were not performing. It was all smoke and mirrors and the bubble duly burst. One of the few stocks from that era which really delivered was Amazon. All the other members of the Magnificent 7 began their march to global ascendancy later in the next millennium (more like a second wind for Microsoft).

There is talk of bubbles now but I think that is nonsense. What we are seeing is a cohort of incredible businesses driving the greatest period of advance in the history of Homo Sapiens. I don't know what the stock market implications are but there is clearly a strong possibility that they will be equally incredible.

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