CORONA VIRUS ALONE – OR IS THERE MORE?

THE THREE MAIN US-AMERICAN STOCK INDICES HAVE THE MOST TERRIBLE WEEK SINCE THE GREAT RECESSION 1929 FF. MANY PEOPLE THINK IT IS THE CORONA VIRUS THAT PUTS FEARS INTO INVESTORS’ MINDS. BUT IS IT ONLY THE CORONA VIRUS ALONE – OR IS THERE MORE?

NO DOUBT THE CORONA VIRUS PLAYS A BIG ROLE IN THE CRASH THAT HIT US-AMERICAN INDICES IN THIS WEEK. IF YOU LOOK AT INVESTING WEBSITES LIKE INVESTOPEDIA (https://www.investopedia.com/), YOU WILL SEE THAT MANY US-AMERICAN CONPANIES COMPLAIN. OBVIOUSLY, THE CORONA VIRUS INTERRUPTED THE SUPPLY CHAINS FOR PRODUCING THEIR MERCHANDISE AND SERVICES. MANY AMERICAN FIRMS GET THEIR SUPPLIES FROM CHINA AND OTHER EAST-ASIAN COUNTRIES. THEREFORE, IT IS NO MIRACLE THAT THEIR EARNINGS AND PROFIT FORECASTS FOR 2020 GO SOUTHWARD. ONE RESEARCH DEPARTMENT OF A GLOBAL BANK EVEN BELIEVES THAT THERE WON’T BE ANY POSITIVE EARNINGS RESULTS AT ALL IN 2020.

BUT IS IT ONLY THE CORONA VIRUS THAT CONTRIBUTES TO THIS OBVIOUS STOCK MARKET CRASH IN THE UNITED STATES? (BESIDES, OTHER STOCK MARKETS WORLDWIDE ALSO WENT DOWN SIGNIFICANTLY. HERE, OTHER FACTORS BESIDE THE VIRUS CONTRIBUTE TO THE DOWNFALLS. BUT, IN MY OPINION, THEY ARE DIFFERENT THAT IN THE U.S.A. IN THIS ARTICLE, I CONCENTRATE ON THE SITUATION IN THE U.S.A.)

IN MY OPINION, THERE IS AT LEAST ONE MORE OTHER REASON BESIDE THE VIRUS CONTRIBUTING TO THE RECENT DOWNFALL. THE U.S.-AMERICAN STOCKS ARE OFTEN OVERPRICED. SIMPLY, WE SEE THAT, E.G., IN THE FACT THAT SINCE YEARS, WARREN BUFFET’S BERKSHIRE HATHAWAY DID NOT FIND ANY COMPANY TO BUY.

WARREN BUFFET PREFERS TO BUY COMPANIES WITH A HIGHER INTRINSIC VALUE THAN THEIR PRICE. WE DEFINE INTRINSIC VALUE AS:

Intrinsic value is a measure of what an asset is worth. This measure is arrived at by means of an objective calculation or complex financial model, rather than using the currently trading market price of that asset.

In financial analysis this term is used in conjunction with the work of identifying, as nearly as possible, the underlying value of a company and its cash flow. In options pricing it refers to the difference between the strike price of the option and the current price of the underlying asset.

https://www.investopedia.com/terms/i/

FOR BUFFETT, THE INTRINSIC VALUE OF A COMPANY MUST BE HIGHER THAN THE PRICE HE PAYS FOR IT.

AND INVESTORS OVERPRICED THE U.S.-AMERICAN STOCK MARKETS EXTENSIVELY. THESE ARE ESPECIALLY COMPANIES WITH RELATIONS TO THE DIGITAL AGE, THE SO-CALLED GROWTH COMPANIES. WE MUST SEE THIS IN OPPOSITE TO VALUE COMPANIES – COMPANIES BUFFETT WOULD BUY.

MANY COMPANIES ON THE US STOCK MARKETS DON’T EVEN MAKE A PROFIT. THEY GROW AND GROW AND GROW, BUT THEIR DEBTS ALSO GROW AND GROW AND GROW. IN MY EYES, THIS IS NOT HEALTHY. THIS IS ESPECIALLY THE CASE IF PROFIT DEPENDS MOSTLY ON ADVERTISEMENT SALES.

THEREFORE, I BELIEVE THAT THE AMERICAN STOCK MARKET DOES NOT ONLY SUFFER FROM THE CORONA VIRUS. SURELY, AN ADDITIONAL POINT IS AN ESCESSIVE OVERPRICING OF AMERICAN COMPANIES, NOT BACKED BY ENOUGH ASSETS.

CORONA VIRUS ALONE – OR IS THERE MORE? OBVIOUSLY THERE IS MORE THAN THE EYE CAN SEE.

 

 

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