The Motley Fool

Quick Thought Of The Week: Confusion

There is a distinct smell of despair just about everywhere in the world we look today. Confusion reigns.

America can’t decide whether a trade war with China is good or bad for its economy. But it will go ahead with doing what it is doing, regardless. Madness.

The UK, meanwhile, is determined to continue peddling the line that it will leave the European Union on 31 October, even if it means dragging the country, and probably parts of Europe, into an economic slowdown. Turkeys voting for Christmas.

Japan and South Korea are at loggerhead over trade, and China will do everything in its power to smother the demonstrations in Hong Kong, which include labelling peaceful protests as terrorism. Treating a symptom rather than a cause does not solve a problem.

Quantitative hubris

Perhaps it is because we have emerged from the financial crisis of 2008 relatively unscathed, thanks to quantitative easing, that has emboldened some global leaders to flex their pecs….

…. I can’t imagine anyone doing anything this stupid when central bankers were frantically digging the global economy out of the financial mess created by the governments of the day in 2008.

But the fact that people will find ways to shoot themselves in the foot is something that we investors must always be prepared for. Hubris before the fall.

However, we should never let anyone to stop us from investing. We must never allow anyone to distract us from doing what is right for the long term, namely, taking care of our financial futures.

Staying the course

We won’t go too far wrong if we put our trust and our money into businesses that could do well in both good times and bad. These are companies with wide moats, strong balance sheets, pricing power, high return on equities and a proven track record of growth.

We can find these companies in virtually every market around the world. So, watch for unusual circumstances that depress the stock price of these businesses in relation to their intrinsic values….

…. And snap up meaningful quantities when those opportunities arise. Try to ignore the noise and see pessimism for what it is – a producer of low prices that benefit rational buyers of long-term value.

A version of this article was first published in Stock Advisor.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore Director David Kuo doesn’t own shares in any companies mentioned.