With the markets delivering a fantastic performance over last 1 month, there is a lot of debate whether the markets have started a new bull market or is it a sort term dead cat bounce. Here are some very important and useful articles from Gurus:
In the article, Warren Buffett shows using past data that bonds usually don’t deliver returns more than the inflation. Over a long term, they cause a serious loss in purchasing power to the holder of the instrument. The above chart shows the fate of $100 and how equities deliver a much superior returns compared to any other asset class.
For unproductive investments in Gold, he says that for total value of Gold in World:
…we could buy all U.S. cropland (400 million acres with output of about $200 billion annually), plus 16 Exxon Mobils (the world’s most profitable company, one earning more than $40 billion annually). After these purchases, we would have about $1 trillion left over for walking-around money…
The worlds largest money manager says:
I don’t have a view that the world is going to fall apart, so you need to take on more risk […] You need to overcome all this noise. When you look at dividend returns on equities versus bond yields, to me it’s a pretty easy decision to be heavily in equities.
You need a cocktail of three things for a bull market to take place. The first is scepticism. Actually, there is no one who believes the US, in the midst of its crisis, could go into a bull market. Second, you need leadership. And, that is with all technology stocks you name — Google, Apple, Facebook or Twitter. Technology stocks are showing unbelievable gains. Finally, you have a lot of liquidity available, already signaled by the European Central Bank and the Fed.
We also feel that the markets might have bottomed out. There are some very promising ideas available in the market and they should deliver better returns that investments in gold or bonds. Inspite of regular selling by DIIs (MFs & retail investors) the markets have been rising. The retail participation is at its lowest and the weaker hands seem to have exited.
The Sensex returns haven’t been good over last 3-4 year. The valuations are very reasonable; and if one looks 3-5 years forward, then there is a very high probability that markets would be much much higher. The sensible thing is to keep investing into good individual ideas and keep building a quality portfolio. Don’t get swayed by short term price variations.