Last Friday, Warren Buffett's Berkshire Hathaway released a letter to shareholders known as the "bible of value investors". In his letter, Mr. Buffett boasted about the performance of Coca-Cola, American Express and the insurance business, as usual, while also saying that investments in railways and energy had failed. But rarely, Buffett also painted a picture of the perfect investor in his mind.
Buffett cites his youngest sister Betie as an example of the perfect investor who should possess traits such as absolute sanity, the courage to challenge authority, and an understanding of human weaknesses. Most importantly, they should not trust the so-called "experts", because if the experts** are really reliable, it is as ridiculous as the person who discovered the gold mine does not get rich quietly, but goes around announcing the location of the gold mine. People who claim to know the answer are either self-deception or a flamboyant salesman.
Warren Buffett believes that there are a lot of "stupid" salesmen on Wall Street today, and the market is far more like a casino than when he was younger. More people prefer to buy "lottery tickets" with a small amount of money than to buy "farms" through savings. And Warren Buffett still insists that you only need to grasp two secrets to make a good investment, that is, economic tailwinds plus compound interest.
In the final analysis, Buffett hopes to give shareholders confidence in Berkshire and attract more investment. For the financial market, Warren Buffett's choice is value investing, which has become a default law. So when Warren Buffett started buying Japan**, institutions large and small began to follow suit. In particular, as the central banks of Europe and the United States repeatedly pulled the expectation of interest rate cuts, a large amount of hot money in the market poured into the Asian market, and due to the restrictions on US investment in China, more funds flowed into Japan. Bringing the Nikkei to over 40% in one year**.
Judging from the heat map, Japan's major sectors have risen relatively evenly in the past year, and there has been no serious bias, which is very different from the US stocks. On the one hand, Japan's economy has improved and the threat of ending the decade-long deflationary threat, and on the other hand, there is an increase in exports due to the depreciation of the yen and the corresponding appreciation of assets. Take the five major trading companies invested by Warren Buffett as an example, and the capital invested is 16 trillion, and the current market capitalization has been as high as 29 trillion yen. Yields have already exceeded 60%, and that's not counting the leverage effect of Buffett's capital raised through the issuance of Japanese bonds.
Why is Warren Buffett bullish on Japanese companies?
Certainly not for this 60%. From the perspective of value investing, Warren Buffett looks at the mispricing of assets in the market, or the good companies that are seriously undervalued. Japanese companies are affected by both deflation and quantitative easing, and their business models tend to be stable and investors' preferences tend to be conservative, so low valuations are widespread. With regulatory requirements, companies reduce their cash reserves and increase investor returns. The fundamentals of Japan** have strengthened, which is the real reason why Buffett invests in Japan**.
However, the recent surge in inflation is multifaceted, the recovery of inflation, the strengthening of AI and chips, and the decline of the yen are all helping the Nikkei index to reach a new high, and finally broke the highest record 35 years ago. These breakouts are short-term, but from a fundamental point of view, a technical recession, unstable inflation, and the possible removal of negative interest rates by the Bank of Japan may all lead to a rapid pullback in the Nikkei after a sharp surge. Without Warren Buffett's long-term vision, the risk of chasing the Nikkei is already greater. Japan's earnings season in March could be the trigger for a big deal.
Looking at the Nikkei daily chart, the Nikkei has risen by 30% in just three months, and this increase cannot be supported by economic recovery. The emotional side is dominant, and it is easy to have a big rise and then a big fall. **Look, before the earnings season, AI momentum is strong** to drive **continue**. The trading strategy should be the same as that of U.S. stocks, and follow the trend. But when it comes to earnings season, it's time to test the market's expectations. If expectations are disappointed, the Nikkei may spit out most of its previous gains. The investment strategy needs to wait for the index to bottom before entering the market. The support below the current price is at 36000 and 33500.
Focus on the data today
23:00 Total U.S. new home sales in January are annualized.
23:30 US Dallas Fed Business Activity Index (February).
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