So, I’ve a better idea… How about Warren Buffett for president?

America used to inspire the world

Warren, as many readers of this article will know, is the greatest investor who has ever lived. He started out as a middle-class boy from Omaha, Nebraska who figured out at an early age how to make money from investing.

America used to inspire the world. But the American dream, once exciting and relentlessly positive, has taken a battering in recent years. American industry has been beaten all-ends-up by a rising China and India. And the thing is, a lot of Americans haven’t fully realised that the world has changed, and changed completely.

One good thing that Donald Trump has done is bring into the open the plight of the American economy. But the remedies proposed seem lacking: protectionism, blocking immigration and massively increasing taxes on the rich.

Warren Buffett basically is the American dream. He turned thousands of dollars into millions, and millions into billions. He took over failing company after failing company and turned them round. And all through this, he has had faith in the strengths of the US economy.

Buffett would be the ideal president as he knows all about money. He’s an expert in making the most of what he’s given, and has the ability to get things done. It’s not by chance that he’s one of the world’s richest men.

Today it needs to change

The US needs change. Right now it needs someone who sees the big picture, who looks beyond the constant talk of protectionism and immigration, and who will let go of the past and embrace the future, no matter how uncertain it is.

America needs less emphasis on profit and share prices, and more on looking after its workers. It needs less emphasis on being number one, and more on building partnerships with the world. And it needs to refocus from its traditional manufacturing industry to catering for the consumer masses of emerging markets.

The world’s production capacity has been hugely increased by emerging markets, but that’s actually a good thing. The fault lies in a horse-drawn financial system that’s trying to run a motorised world. We need to match the increased global production capacity by reflating, and massively so. This should be done by increasing the money supply.

By printing money not just to buy bonds but also to invest in infrastructure, research and development and public services, America could create millions of jobs and also bring inflationary and deflationary forces into balance. It would fix everything.

In the 1980s it took Margaret Thatcher to shake the world out of its torpor. We need a Buffett-like figure to do the same now.

The post Warren Buffett for President! appeared first on The Twelfth Magpie.

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Buffett’s investment vehicle Berkshire Hathaway has just announced that the Sage of Omaha has bought a stake of 9.8 million shares, worth $1.07 billion at the time, in tech giant Apple (NASDAQ: AAPL).

Defying comparison

This is particularly interesting, as there’s been a lot of talk, both Stateside and in the UK, suggesting that the iPhone maker had peaked. After huge sales of the iPhone 6 and the iPhone 6s, analysts were saying that profitability was likely to fall, along with the share price. Should we now revise our view? Or is Buffett too late to the party?

Apple is one of those companies that defies comparison with any other firm you can think of. It recently reached a higher market capitalisation than any other business in history. It makes more profit than any other listed company on Earth. It has led a revolution in the way consumers live their lives, with hundreds of millions of smartphone and tablet owners around the world.

Yet recently there have been a few disappointments, such as sales of the Apple Watch being lower than hoped-for and iPad sales edging down. However, Apple still arguable has the highest cachet in tech, and no other company, whether it be Samsung, Huawei or HTC, can touch it in terms of brand awareness and the premium consumers are willing to pay over products from other firms.

Classic Buffett

Buffett always used to say that he avoided tech investments because he just didn’t understand them. But he broke that taboo with his purchase of IBM shares. And if you are an investor in today’s world, technology is so pervasive that it is hard to avoid such companies, particularly if you are searching for growth potential.

And, really, this purchase is classic Buffett. When everyone was talking up Apple, the financial guru steered well clear of the stock. But when the share price fell and shareholders started selling their holdings, he began to build a stake. Apple is certainly not the typical contrarian share, but this is contrarian investing.

Often Warren will not buy the cheapest firm that he can find, but the best company he can find, at the cheapest price. And there is one Buffett quote that, for me, sums up this purchase “It’s far better to buy a wonderful company at a fair price than a fair company at a wonderful price.”

Yes, the Sage is late to the party. But, if you look at the big picture, the smartphone trend that Apple established still has a long way to go. And in my view, the firms that will do best in today’s business environment are those that will sell to the rapidly growing consumer masses of China and India. And that is Apple down to a tee.

Yes Warren, although it pains me to say it, you’ve done it again.

The post Why Warren Buffett bought Apple Inc appeared first on The Twelfth Magpie.

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Prabhat Sakya has no position in any shares mentioned. The Motley Fool UK owns shares of and has recommended Apple. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

A lot of people still dispute the fact that this nation is in trouble. Compare the unemployment rates of the leading nations, they say. The US has an unemployment rate of 5%, comparable to the UK’s rate of 5.1%. Surely all is fine and dandy?

Or is it?

Yet what is an unemployment rate? It’s the number of people who have no job and are actively looking for work. It leaves out all those who have given up looking for work. It’s actually more informative to check the employment than the unemployment rate.

In Britain the employment rate is 74.1%, which is as high as its ever been, and shows the economy is doing well. In the US it’s 63%. The difference is stark.

Yet people say American companies still dominate global business. If you were to ask people which firm they admired the most, many would say Apple (NASDAQ: AAPL), Alphabet (the company formerly known as Google), or Facebook. These are hugely successful, profitable, and some of the most valuable businesses in the world right now.

Apple has a market capitalisation of $587bn, a number so huge it verges on the ridiculous. This is a valuation that’s far higher than rival industrial giants that formerly dominated our consciousness, such as General Electric. Yet Apple only employs 115,000 people. Facebook has a market capitalisation of $322bn. Yet, remarkably, it employs only 12,600 people. In comparison, GE employs 305,000 and Walmart employs a massive 2.2m.

US manufacturing is in decline

Behind the scenes, what we’re seeing is the slow decline of US manufacturing industry, and the rise of an unstoppable China that has now become the workshop of the world. Tech in the States may be booming, but it provides only a fraction of the jobs that traditional manufacturing provided.

Facebook needs so few people because all it does is run a website. It just happens that this website is the most popular in the whole world. Apple employs people in its shops, to market its products, and in its design studios. But Chinese company Foxconn actually makes iPhones and iPads. And if the manufacturing is outsourced, so are the jobs.

It might sound strange coming from an investing website, but it seems US firms are placing too much emphasis on profits and share price, and not enough emphasis on preserving the jobs of its workers. Companies in the US simply can’t compete in terms of profitability with those in China. That is why I advise readers to invest not in the US but in China and India.

And all this is played out with a backdrop of a presidential campaign where much of the talk has been about protectionism and blocking immigration. In reality, the economy needs to be reflated substantially, US companies need to refocus, and America needs to view emerging markets not as the enemy, but as trading partners.

There is a road back for America, but it will be slow and difficult.

The post Apple Inc, China And The Hollowing Out Of American Industry appeared first on The Twelfth Magpie.

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Prabhat Sakya has no position in any shares mentioned. The Motley Fool UK owns shares of and has recommended Apple. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

Uncertainty abound

As shown in the chart below, we can see that the index hasn’t been the same since breaching the 7000-point mark back in April last year. Indeed, it wasn’t long after that all-time high when volatility struck the markets, eventually leading to a bear market, followed in March by a huge bounce, which seems to be quickly running out of steam as I type, possibly as investors take  profits before Easter.

The problem, at least to my mind, is that there are major events over the course of the coming year which could see markets crash further if the results are not as hoped. Of course, I’m talking about the upcoming referendum on whether Britain should remain in the European Union or not —  to be held on Thursday 23 June — and the US Presidential elections — currently scheduled to take place on Tuesday 8 November.

Investors don’t have to look far to gauge the views of any number of high-profile investors or business leaders, and more importantly for investors, the effect that it will have on the UK stock market.

And, though I am neither, I’m quite happy to throw my hat into the ring with my prediction: I think that the FTSE 100 will move significantly dependant on the result of the referendum and again once the “Leader of the Free World” is decided.

If the results are what the markets want, we could see a huge relief rally heading into December – however – that is a big if!

A very different view

You see, while it true that when you’re not invested you will dodge some of the market’s worst days, it is also true that you also risk missing out on the markets best days, too. It is this that can seriously damage your returns.

While not directly related to the FTSE 100, I have been to several presentations now where speakers site an interesting study from JP Morgan Asset Management released in 2015. This report showed what happened when investors missed out on the market’s 10 best days between 1995 and 2014. 

An investor who stayed fully invested during those 19 years would have achieved an annualised total return of nearly 10%. But an investor who missed the 10 best days in the market would have seen their annualised returns fall to just over 6%.

While that may not seem the end of the world to most, it is well worth looking at it in a slightly different way:

An investor who put $10,000 in the US market would have made $55,000 by being fully invested without any selling or additional buying over those 19 years. However, had if they had missed the 10 best days they would have made only $23,000 – that’s a sizable difference, and illustrates that those of us who try to time the market are at risk of missing out on huge potential gains.

The post Why It Could Be A Good Idea To Stay Out Of The FTSE 100 Until November appeared first on The Twelfth Magpie.

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However, finding the best places in which to invest it can be tough. And, with the world becoming increasingly globalised and technology constantly improving, the choices facing private investors in terms of which regions to invest in have become far broader in recent years.

In the past, of course, investing outside of the UK was difficult. However, with the advent of the internet, it is now relatively straightforward to invest in European stock market, in the USA, Japan and various emerging markets across the globe. All have their pros and cons and, ultimately, can enable you to bring retirement a step closer, help pay off the mortgage, or provide a more abundant lifestyle.

Clearly, the FTSE 350 is a great place for any UK-based investor to start. That’s because there is a wide range of companies listed in the UK, many of which either do not operate in the UK or at least have considerable regional diversification. As such, their correlation with the UK economy is relatively low and, in the long run, this can help to de-risk a private investor’s portfolio.

Furthermore, buying UK-listed shares is very simple, with there being no exchange rate issues and no additional taxes levied on an individual. And, while the FTSE 100 is within 10% of its all-time high, its current level is hardly expensive, with there being excellent value for money on offer among a wide range of large, medium and small caps.

Of course, investing in the US provides a much greater degree of diversity than solely buying UK-listed shares. For starters, it is many times bigger than the FTSE 350, with the S&P 500 being just a tip of a vast ‘iceberg’ of listed companies in which you are able to invest. Certainly, tax matters are more complicated, with a W-8BEN form needing to be completed to ensure dividends are taxed at 15% rather than 30% by US tax authorities. And, there is the potential for losses from negative currency fluctuations, too.

However, with US interest rates seemingly set for a sharper rise than those in the UK, owing to comments made by the Federal Reserve and also the strength of the US economy, it could be the case that currency returns are positive over the medium to long term.

Meanwhile, Europe may be struggling to grow, but it remains a very enticing region in which to invest. That’s because it offers a wide range of top quality companies at relatively appealing prices, many of which are major brands and which therefore may have wide economic moats. And, with the Eurozone set to benefit from the effects of quantitative easing over the medium term, investor sentiment could pick up moving forward.

The problem for UK investors, though, is that with UK monetary policy set to tighten and the Eurozone’s expected to remain ultra-loose, currency movements could be negative for UK investors, thereby reducing profits.

While the Chinese stock market has fallen heavily in recent weeks, it remains a country with unrivalled long term growth potential. A challenge identified by many investors, though, is question marks surrounding corporate governance at Chinese companies and, as such, it may be prudent for private investors to buy shares in UK or US listed businesses that have considerable exposure to the Chinese market.

Japan, meanwhile, remains a firm favourite among investors, and, while concerns surrounding its debt levels have been highlighted in recent weeks by the IMF, it continues to offer a number of high quality companies trading at relatively appealing price levels. Certainly, ‘Abenomics’ is an abrupt change to the country’s past monetary policy, but if it is successful in reflating the economy then investments in Japan could prove to be highly profitable in the long run.

The post Where In The World Should You Invest Your Hard-Earned Cash? appeared first on The Twelfth Magpie.

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• With a yield of 6.8% and a P/E ratio of 12.1, is this a dirt cheap FTSE 250 stock to consider?
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• Up 95%! This FTSE 100 stock’s outperformed Nvidia over the past year
• With a 9.3% yield, is this an amazing opportunity to consider buying dirt-cheap Taylor Wimpey shares?
• How much do you need in a Stocks and Shares ISA to aim for £375 a week in retirement?