Warren Buffett loves to talk about "moats": things which protect his portfolio companies from competition. And his core business – reinsurance – has some of the highest barriers to entry in the world. Chris Dillow takes these ideas to their logical conclusion:
A booming stock market is no proof of a healthy economy; the Zimbabwean market is doing well now. Indeed, in a really healthy competitive economy, stock markets would do badly – if they existed at all – because profits would be incessantly bid down by fierce competition. A rising stock market can therefore be evidence of a lack of dynamism in the economy, that incumbent firms are being sheltered from competition. The French market has out-performed the US over the long-term.
Try telling that to the talking heads on CNBC.