Ahh, the power of distraction. On Friday, the Bureau of Labor Statistics reported 266,000 new jobs were created in November. That was better than expected, even after deducting the 40,000-plus General Motors employees returning to work, reported CNBC. The sign of economic strength helped major U.S. stock indices recover from losses suffered earlier in the week – mostly. The week got off to a rough start when President Trump indicated there was little urgency to resolving the trade dispute with China. The statement upset expectations a phase one trade deal would be completed before December 15. That’s the date the United States is scheduled to put additional tariffs on Chinese consumer goods. New tariffs could inspire additional actions by the Chinese government that affect economic growth in the United States. To date, U.S. economic growth has slowed from 3.1 percent in the first quarter of 2019 to 1.9 percent in the third quarter. The slowdown was caused, in part, by Chinese tariffs on American products. Tariffs have had a negative effect on manufacturing and agriculture, as well as other sectors of the market. Trade uncertainty has also led to a decline in business investment. When business investment drops, so does the economy’s growth potential. The main engine behind U.S. economic growth has been and remains the American people. Consumer spending accounted for 68 percent of U.S. economic growth in the third quarter. The Standard & Poor’s 500 Index finished the week in positive territory. The Dow Jones Industrial Average and Nasdaq Composite finished down 0.1 percent.
Sources: Yahoo! Finance, MarketWatch, djindexes.com, London Bullion Market Association.
Investor PhilosophyAs you know, a well-designed plan is necessary for successful investing, along with the discipline to stay on course, re-balance, and tax-manage, as needed. Here are some of Warren Buffett’s best quotes on investing. Buffett is arguably the best investor of our generation and these quotes come Simon Reynold’s book, Thoughts of Chairman Buffett: Thirty Years of Unconventional Wisdom from the Sage of Omaha:
- On how to view stocks: “Look at stocks as businesses. Look for businesses you understand, run by people you trust and are comfortable with, and leave them alone for a long time.”
- On choosing investments: “It’s like when you marry a girl. Is it her eyes? Her personality? It’s a whole bunch of things you can’t separate.”
- On giving your kids a big inheritance: “The idea that you get a lifetime supply of food stamps based on coming out of the right womb strikes at my idea of fairness.”
- On stocks with good histories: “The investor of today does not profit from yesterday’s growth.”
- On thinking long term: “I wouldn’t buy any stocks I would not be happy owning if they stopped trading it for three years.”
- On predicting markets: “The fact that people will be full of greed, fear, or folly is predictable. The sequence is not predictable.”
- On the limitations of wealth: “Money, to some extent, sometimes lets you be in more interesting environments. But, it can’t change how many people love you or how healthy you are.”
- On the ideal investor personality: “The most important quality for an investor is temperament, not intellect. You don’t need tons of IQ in this business… You need a temperament that derives great pleasure neither from being with the crowd nor against the crowd. You know you’re right, not because of the position of others, but because your facts and your reasoning are right.”
- On risk: “Risk is not knowing what you’re doing.”
- On long-term thinking: “Our favorite holding period is forever.”