Warren Buffet and Coming Recession
I am super excited because the number of reviews on Amazon of my book, How to Day Trade for a Living, are now at almost 12,000! I would like to thank everyone who took the time to review my book! I’d love a few more honest reviews of the book in order to hit – and surpass – this amazing number. Any honest review is greatly appreciated and it sincerely does mean a lot to me. My book has been a bestseller for 7 years due to all of your help, support, and constructive feedback. You can review it here. Thank you!
With regard to trading, I want to make some comments in this newsletter about both my trades this week and the overall state of the market.
The last 2 days, we had some excellent trading days. On Thursday, many of us in the chatroom traded HPQ because of the position taken by Warren Buffett. HPQ’s shares gained in premarket trading after Buffett’s Berkshire Hathaway bought a stake in the laptop maker that was valued at more than $4.2 billion. Berkshire has now become the company’s largest shareholder, according to data compiled by Bloomberg, with an 11.4% stake. The investment giant has definitely been taking advantage of stock market volatility this year to put its money to work. Buffett also bought shares in Occidental Petroleum (OXY) last month, building a stake that now ranks among Berkshire’s top 10 common-stock bets. You can watch the recap of my trade on HPQ here.
Today in the chatroom, many of us traded QQQ, which is an index of high-growth technology stocks which are being hurt the most in this environment of rising interest rates (not to mention the potential for a recession). I was able to take a nice reversal on it. You can watch my recap here.
For at least 2 reasons, people right now are questioning the state of the economy and the stock market. First, there is the high level of inflation that has been partially caused by the global pandemic-related supply chain disruptions and, second, the war in Eastern Europe that has led to a spike in energy prices. One of the end results is that investors are leaving the stock market for the bond market. The Federal Reserve is also facing a hard time, as they are having to raise interest rates in order to reduce the supply of money so as to battle inflation and lower their balance sheet. This is otherwise known as tightening. Ardi has explained these phenomena very clearly in his recent video that you can watch here. The different measures being implemented may very well cause a significant recession. For instance, from a historical perspective, each time that oil has reached the levels it is at today, we have experienced a recession.
There are many economists, such as those at Goldman Sachs, who are concerned that the Fed will have to spark a recession to rein in inflation. Others, like those at Pacific Investment Management (PIMCO), although less certain about the recession angle, have nonetheless affirmed that inverted yield curves are indeed an ominous development.
It is too early to write the history yet. We shall see.
Lastly, I wanted to let you know that we will soon be publishing a new episode of AfterHours with Traders, this time featuring Mike, Brian, and Ardi. Stay tuned!
Do have a good weekend and be healthy and safe! Spring has arrived and Vancouver is beautiful these days. I hope your corner of the world is too!
To your success,
PS1: Don’t forget to try out our free web-based trading simulator at stocktradingsimulator.com. It’s conveniently available 24/7, whenever you have time to practice honing your trading skills.
PS2: If you are not already an Elite member, I urge you to take advantage of our “Hello Spring” promotion. You will find the details here. You will receive 50% off the price of an Elite annual membership and in return you will gain access to all of our past webinars as well as those planned for the future.