We know of one of those who uses technical analysis – Buffett himself. He has made some rather unusual bets during his career. He invested in a company named Calico (which ended up going bankrupt) and he bought it at very low levels in the 1980s as a hedge against the S&P 500. He lost a good chunk of money on Calico but it was all money that was invested in the company.
In fact, there are records of the shares of Calico that were purchased. But Buffett had no idea that he had purchased them until a week later. There were many people at the stock buyback in 1980 and there were lots of them. One person bought over $1.3 million worth of shares and then Buffett bought a lot of it as he was told that he would lose the entire amount (some people lost a million dollars more).
We’ll let the reader figure out whether that was a prudent stock buyback. That is one way to know if a guy is buying technical analysis. There is another way to know if he is using technical analysis: How many trades can he make on a single day?
Some of the stock buybacks in the 1980s had no technical analysis and you can imagine how it makes him feel to lose so much money on that day. That is certainly not what he plans on doing and in fact it makes him feel less comfortable buying so many stock. It also makes him worried about the future because that’s what a stock trader is looking for: for it not to work out the way he would like it to. However, he knows from experience that that is not the way things get done when he buys a stock. The thing to take away from this is simple: He’s going to be buying stocks that are going to be a little over priced in the future. He is going for the long term. Those are generally the stocks that people look for in the market.
Warren Buffett bought over $2.8 billion in the first month of March of last year. That means if he had started on the stock buyback on that day in 1980, he would have bought $2.8 billion in shares. That is a big number. How much money he can make that day, or any day, is not something he can control, but we are confident he could buy a lot of that stock in a short period of time, with very low trading fees.
We also know that he has been using a lot of math to work
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