Morning Note - Buffet upbeat about prospects

by James Gerrish 28 February 2011

** 28/02/11  - 8.27am  -  by James Gerrish** 
  • The US market bounced on Friday as focus turned back on continued flow of better domestic data. 
  • The DOW JONES added + 61 points or +0.51% to close at 12130. 
  • Still, the S&P 500 had it biggest weekly drop in three months (down -1.7% on the week) as concern that tensions in the Middle East would put sustained upward pressure on Oil prices which would threaten growth in the US. 
  • The local market was positive on Friday with the S&P/ASX 200 adding +27 points to close at 4836. Most of the buying was done after lunch which lead to a strong close. 
  • The 4800 level on the local bourse is a critical one and it will remain in focus this week. A break and close below this level will be bearish and I'd call the market back to 4700.
  • For now though, we'll take the bounce last week as a positive and we're likely to see some follow through when trade kicks off this morning.
  • SPI FUTURES are indicating a rise of +20 points 
  • Warren Buffet, the 'Oracle of Omaha' released his much anticipated letter to investors on Saturday.  I love reading this letter and as always, there was some pearls of wisdom. I've included a couple below:
    • He said his “trigger finger is itchy” for takeovers after cash holdings at his Berkshire Hathaway climbed to $38.2 billion. He said “Our elephant gun has been reloaded.”
    • Buffett is seeking takeovers after Berkshire’s $13 billion 2010 profit increased the firm’s resources and near record-low interest rates limited the returns available in fixed-income markets. ”
    • This goes some way to explain why the US stocks market has outperformed our market - US investors have very few options that will earn decent returns and at the moment, equities still remain the best of these. 
    • On the state of the current market he wrote.....“Commentators today often talk of ‘great uncertainty. Don’t let that reality spook you. Throughout my lifetime, politicians and pundits have constantly moaned about terrifying problems facing America. Yet our citizens now live an astonishing six times better than when I was born.”  He further wrote, 
  • "Money will always flow toward opportunity, and there is an abundance of that in America. The prophets of doom have overlooked the all-important factor that is certain: Human potential is far from exhausted, and the American system for unleashing that potential - a system that has worked wonders for over two centuries despite frequent interruptions for recessions and even a Civil War - remains alive and effective."
  • So at this stage, its pretty clear that Buffet is upbeat about the prospects in the US. Remember, Buffet was the one buying during the doom and gloom and it appears that he's still keen on spending money to take advantage of more upside in the US economy. 

Disclaimer

James Gerrish is an Authorised Representative (Rep No. 352904) of Shaw Stockbroking Limited ("Shaw Stockbroking"). Shaw Stockbroking is a holder of Australian Financial Services Licence No 236048. Shaw Stockbroking, its directors, officers, associates and employees each declare that they, from time to time, may hold interests in financial products and/or earn brokerage, commission, fees or other benefits from financial products mentioned in this e-mail or attached documents. Unless specifically stated within this page or an attached document, any information communicated by this e-mail constitutes unsolicited general financial product advice which has been compiled without regard to any investor's individual objectives, financial situation or needs. It is not specific advice for any particular investor. Before making any decision about the information provided, you need to consider the appropriateness of this information having regard to your individual objectives, financial situation and needs and consult your adviser. Any indicative information and assumptions used here are summarised and also may change without notice to you, particularly if based on past performance or relate to a future matter.
 

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