Why Ignore Macroeconomic
Factors?
From Warren Buffett's 1994 Shareholder
letter:
"We will continue to ignore political and
economic forecasts, which are an expensive distraction for
many investors and businessmen. Thirty years ago, no one
could have foreseen the huge expansion of the Vietnam War,
wage and price controls, two oil shocks, the resignation of
a president, the dissolution of the Soviet Union, a one-day
drop in the Dow of 508 points, or treasury bill yields
fluctuating between 2.8% and 17.4%."
"But, surprise - none of these blockbuster
events made the slightest dent in Ben Graham's investment
principles. Nor did they render unsound the negotiated
purchases of fine businesses at sensible prices. Imagine the
cost to us, then, if we had let a fear of unknowns cause us
to defer or alter the deployment of capital. Indeed, we have
usually made our best purchases when apprehensions about
some macro event were at a peak. Fear is the foe of the
faddist, but the friend of the fundamentalist."
"A different set of major shocks is sure
to occur in the next 30 years. We will neither try to
predict these nor to profit from them. If we can identify
businesses similar to those we have purchased in the past,
external surprises will have little effect on our long-term
results."
"We try to price, rather than time,
purchases. In our view, it is folly to forego buying shares
in an outstanding business whose long-term future is
predictable, because of short-term worries about an economy
or a stock market that we know to be unpredictable. Why
scrap an informed decision because of an uninformed guess?"