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Going for Warren Edward Buffett's Data-Driven Investment Analysis


It's very annoying how social media can get from hardheaded boomers to millennials who think they're right all the time. Luckily, there are some wise old men like Warren Edward Buffett. Social media can become a more destructive tool these days. However, I feel that the use of social media can be good. Right now, the news of the Philippine Stock Exchange Index (PSEi) has been lower. The scores have been dropping and the recent PSEi score today closed with 5897.68. I wouldn't be surprised if I open Facebook and I find people making all sorts of social media gossip again. But again, the question is would I listen to the wise old grandpa of investors, Buffett, or would I listen to social media gossipers (read here)? Would you listen to a senile old man who's obsessed with government handouts or would you listen to an investor who can help you get out of poverty?

One thing Buffett mentioned is the need for a good temperament. You need to avoid taking pleasure of going with the crowd or fighting against it. It's pretty much not healthy to blend with the world or fight against it for the sake of it. Instead, as Buffett says, "Be data driven!" With the stock market scores as of late--one may want to listen to Buffett's advice regarding buying the dip. There's the option to do direct stock picking and make your own portfolio. Though, Buffett recommends buying the dip with an index fund during a stock market crash (read here). Getting an index fund in relation to the PSEi would be a good move. In this case, now's the best time to do a lump sum because the market is really cheap right now.

What's causing the stock market to lower down right now? 

I did write about my own simple analysis of stock market performance (read here). It would be good to know the factors that cause it and then comment without understanding. You know the old proverb that says that the empty container makes the most noise. The emptiest mind talks a lot, right? I find the comments stupid when people start to say, "It's the fault of the president. BBM pa more (More BBM!)!" or "If only Leni won then we wouldn't be in this predicament." Never mind that this is a worldwide problem right now. It made me think if only the Philippines were in a parliamentary setting--both Ferdinand R. Marcos Sr. and Maria Leonor Gerona-Robredo would be the government and opposition. Marcos Sr. and Mrs. Robredo would already be discussing their alternatives to help minimize the impact of this world economic problem. 

What we can see affect the stock prices are as follows. First, we have company performance. That's why Jollibee is often picked among the PSEi choices. Jollibee is now a multinational corporation (MNC) from the Philippines. Second, we have investor sentiments. I believe that high-interest rates and inflation are causing investors to lose confidence. The USD to PHP exchange rate is rather high. Third, we have industry performance. If the information technology (IT) sector grows then all stocks related to it grows. It's like how I experienced a 10% increase with my ATRAM Global Technology Feeder Fund then it lowered today. I believe the IT sector is experiencing a temporary decline after the demand went up. Fourth, we have economic factors. These factors are interest rates, inflation rates, economic policy, economic outlook, and the value of the local currency. The PHP is low right now against the USD. The PHP once got stronger than the USD. These are factors we need to watch out for. 

Why I believe economic illiteracy had contributed to the stupid comments

I guess it's really no surprise I'm reading such comments on Facebook. It doesn't matter how much I try to explain (and with sources)--they'll have their own so-called data to "back it up". They tend to write stuff like, "We should only support our local businesses first." or "Protectionism made countries great." Never mind that their so-called data has been refuted long ago by scholars like the late Lee Kuan Yew and Kishore Mahbubani. Singapore hasn't just said it was great--it was an amazing story of how a nation once a third-world country because of a first-world country. Mahbubani's statements about foreign investments being good back it up. Yet, such fools will shun it because it's not from a countryman. Then, you give data from a countryman then they will shun it if it doesn't belong to data from their side. They'll always find an excuse not to analyze the data I present to them.

I blame decades of economic illiteracy. Can you really develop economic knowledge in the K+10 curriculum for a long time? My high school economics teacher was pretty much like the late Miriam P. Defensor-Santiago. The teacher was a brilliant woman but she was forced to teach economics at a rushed pace. Fortunately, we have middle school and high school to learn economics. I really still feel stupid that I only knew the relevance of economics in college. I felt that learning how economics is part of life only in college felt stupid. Sure, I never repeated any of those subjects. The feeling of being stupid wasn't easy to overcome even if I did grasp it. I even feel it's a burden (until now) that I never knew the application of economics until college.

That's why people are prone to believing the lies of groups like Bayan Muna, IBON Foundation, Kabataan (Youth) Partylist, the League of Filipino Students, and the Philippine Anti-Fascist League (which I heard is run by condescending teenagers). The posts they make about foreign direct investments (FDIs) aren't even backed up. Yet, why do people ride on to them? I blame the lack of ignorance. I feel that this generational curse of economic ignorance is a real obstacle. Though, some of them may eventually phase out if more knowledge of economics is built. Major economic geniuses other than Lee (like Deng Xiaoping and Duo Muoi) had to deal with protectionist defenders. Lee even mentioned the school of thought of that day was all centered on protectionism. They did it by building more awareness. Vietnam is rich in natural resources but it was poor until it became more FDI-friendly. China was richer in natural resources compared to Taiwan. Yet, Taiwan was richer. China opened its doors to FDI and the former became a huge economic superpower. 

If more people had more knowledge--they'd actually go for Buffett's style. As said, ignorance is never bliss. People will be destroyed by a lack of knowledge whether they like it or not. Just because you had hundreds of years of experience in one and zero in another doesn't mean the other is better. China had decades-long experience as a protectionist Communist state. Deng turned the tables by making Communist China friendly to FDI. Singapore once had little experience with world trade. Lee turned the tables too. That's why I recommend listening to Buffett over people who are simply gossiping over social media. 

References

Books

"From Third World to First--The Singapore Story: 1965-2000) by Lee Kuan Yew
Harpers Collins Publishers

Videos

"The Singapore economic model - VPRO documentary - 2009"  by VRPO Documentary (September 8, 2018)

Websites 

"Buying the dip: Is this a good strategy when markets are falling?" by James Royal (May 26, 2022)


"What Happens When The Fed Raises Interest Rates?" by Brian O'Connell,  Benjamin Curry (Updated: March 16, 2022)

"What Is an Index Fund? An Easy Way to Enter the Stock Market" by Kevin Voigt (March 20, 2021)

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