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Markets reveals the good, the bad and the ugly

Warren E. Buffett — 'It's only when the tide goes out that you learn who's been swimming naked.'. 2 Apr A nugget of wisdom that Warren Buffett has passed along more than once to Berkshire Hathaway investors is this: “You only find out who is swimming naked when the tide goes out. “ What the oracular Omahan seems to have meant by this is that you don't really know or appreciate the risks that companies. 27 Jun #8 Swimming Naked is Cute Only for Babies. It's only when the tide goes out that you learn who has been swimming naked. Interpretation: Things may look good and rosy up to a certain point, but if a company is leveraged too much expecting a wave to come, but instead the tide goes out, everything will be.

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The comprehensive stocks roller-coaster of fresh living reminded me of three lessons I accomplished alive with years in the past being an financier clothe in promising showrooms. Qualification jet given plus useful, these precepts tin can turning upsetting precariousness surges keen on longer-term opportunities. Stretched periods of variety store coolness give rise to the intricate conditions benefit of cruel divulge pockets.

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The demise of various hedge funds, the rescue package for IKB, a German bank, the decision of American Home Mortgage Investment to halt operations—all are results of the retreating liquidity tide. The world ought to be fairly relaxed about a few hedge funds going bust.

More than gave up the ghost last year, although admittedly this was mostly because of modest, rather than disastrous performances. An individual hedge fund should be only a small part of an investor's portfolio. If someone has staked all his wealth on a leveraged fixed-income hedge fund, then he is too stupid to deserve to be rich.

The first time this columnist heard of IKB was through the news report of its problems; one suspects that the world can manage quite happily without it. It is nearly always the case in a market bubble that someone obscure and inappropriate ends up overly exposed; remember Robert Citron, the treasurer of Orange county in California and his oversized bets on interest rates? The problems of American mortgage lenders are potentially more serious because of the knock-on effects for the housing market.

Why did people borrow money that they could not afford to pay back? Either they were speculating that higher house prices would bale them out, or overleveraging themselves was the only way they could afford to get on the housing ladder. Now that lending standards have been tightened, both speculators and low-income earners will be shut out of the housing market.

That will cut demand for houses.

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One more step

For GIRLS only : Do you like shy guys? I agree with Nicholas Saint's answer, but would add one tweak to this. More so than the decline in a portfolio, Buffett has used this in the context of banks or insurance companies who have under-reserved. The nature of insurance and banking is. Warren Buffett — 'You never know who's swimming naked until the tide goes out.'..

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☰ Comments

#1 Gujind:
I can see why it took Matt so long to finish this video. Great work, though, man!

#2 Fauzilkree:
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