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Warren Buffet in the New York Times

I’ve attached a great article about Warren Buffet and what he is personally investing in within his own portfolio. Better yet, he even explains why so please give this a read!

Buy American. I Am.
By WARREN E. BUFFETT

Omaha

THE financial world is a mess, both in the United States and abroad. Its problems, moreover, have been leaking into the general economy, and the leaks are now turning into a gusher. In the near term, unemployment will rise, business activity will falter and headlines will continue to be scary.

So … I’ve been buying American stocks. This is my personal account I’m talking about, in which I previously owned nothing but United States government bonds. (This description leaves aside my Berkshire Hathaway holdings, which are all committed to philanthropy.) If prices keep looking attractive, my non-Berkshire net worth will soon be 100 percent in United States equities.

Why?

A simple rule dictates my buying: Be fearful when others are greedy, and be greedy when others are fearful. And most certainly, fear is now widespread, gripping even seasoned investors. To be sure, investors are right to be wary of highly leveraged entities or businesses in weak competitive positions. But fears regarding the long-term prosperity of the nation’s many sound companies make no sense. These businesses will indeed suffer earnings hiccups, as they always have. But most major companies will be setting new profit records 5, 10 and 20 years from now.

Let me be clear on one point: I can’t predict the short-term movements of the stock market. I haven’t the faintest idea as to whether stocks will be higher or lower a month — or a year — from now. What is likely, however, is that the market will move higher, perhaps substantially so, well before either sentiment or the economy turns up. So if you wait for the robins, spring will be over.

A little history here: During the Depression, the Dow hit its low, 41, on July 8, 1932. Economic conditions, though, kept deteriorating until Franklin D. Roosevelt took office in March 1933. By that time, the market had already advanced 30 percent. Or think back to the early days of World War II, when things were going badly for the United States in Europe and the Pacific. The market hit bottom in April 1942, well before Allied fortunes turned. Again, in the early 1980s, the time to buy stocks was when inflation raged and the economy was in the tank. In short, bad news is an investor’s best friend. It lets you buy a slice of America’s future at a marked-down price.

Over the long term, the stock market news will be good. In the 20th century, the United States endured two world wars and other traumatic and expensive military conflicts; the Depression; a dozen or so recessions and financial panics; oil shocks; a flu epidemic; and the resignation of a disgraced president. Yet the Dow rose from 66 to 11,497.

You might think it would have been impossible for an investor to lose money during a century marked by such an extraordinary gain. But some investors did. The hapless ones bought stocks only when they felt comfort in doing so and then proceeded to sell when the headlines made them queasy.

Today people who hold cash equivalents feel comfortable. They shouldn’t. They have opted for a terrible long-term asset, one that pays virtually nothing and is certain to depreciate in value. Indeed, the policies that government will follow in its efforts to alleviate the current crisis will probably prove inflationary and therefore accelerate declines in the real value of cash accounts.

Equities will almost certainly outperform cash over the next decade, probably by a substantial degree. Those investors who cling now to cash are betting they can efficiently time their move away from it later. In waiting for the comfort of good news, they are ignoring Wayne Gretzky’s advice: “I skate to where the puck is going to be, not to where it has been.”

I don’t like to opine on the stock market, and again I emphasize that I have no idea what the market will do in the short term. Nevertheless, I’ll follow the lead of a restaurant that opened in an empty bank building and then advertised: “Put your mouth where your money was.” Today my money and my mouth both say equities.

Warren E. Buffett is the chief executive of Berkshire Hathaway, a diversified holding company.

Until next time, have a Magnificent Monday!

Chris

Stay Invested…PLEASE!!!

Volatility seems to be a very popular word lately, and with good reason!

Over the course of last week, we saw the Canadian market fall a whopping 16% in only five business days. Those are numbers we haven’t seen for years. Amazingly however, both the Canadian and American markets bounced back quite strong to start off their trading week. The Dow Jones was up over 11% yesterday and the S&P TSX rebounded today by almost 10%. Those are both very substantial one day numbers and present a great learning opportunity for all of us.

Your Take-Away: There is no one, including myself, who enjoys watching their investment portfolio diminish as we’ve all seen over the course of the last few weeks. It becomes very easy to consider selling your investments and moving everything to cash, but after yesterday and today, it becomes very evident that usually that is not the best decision.

Don’t get me wrong, I’m not here to predict whether this is “capitulation”, a “dead cat bounce”, or even the “bottom” for that matter. I am here to say however that if you lost 16% last week and pulled ouf of the market on Friday, you would have missed a 10% or 11% turn around and still been sitting at your “personal market” low. In other words, you would not have been in the market long enough and thus recovered a good portion of your losses.

Riding the wave is not easy, but if you do have a mid to longer term time horizon, it usually works out to be your best bet in the long run. Staying invested and waiting this out will most likely help you to recoup your losses and exceed your highs over time!

Until next time, happy investing…and waiting!

Chris

Warren Buffet Weighs In

Warren Buffet is widely recognized as one of, if not the most, successful investors of our time.

He was recently interviewed Charlie Rose on PBS and provided some fantastic insight into where our economy is and what he recommends in terms of our own personal response. Below is just a small exerpt from that interview and above is a link to the entire document.

Happy Reading!

Charlie Rose:
There is a time to accumulate and a time to spend.

Warren Buffett:
Absolutely. You want to be greedy when others are fearful. You want to be fearful when others are greedy. It’s that simple.

Charlie Rose:
What are they now?

Warren Buffett:
They’re pretty fearful. In fact, in my adult lifetime, I don’t think I’ve ever seen people as fearful economically as they are right now.

Charlie Rose:
Are you satisfied with that rescue plan?

Warren Buffett:
Well, I don’t think it’s perfect, but I don’t know that I could draw one that’s perfect. But I’d rather be approximately right than precisely wrong, and it would be precisely wrong to turn it down. We need — we have a terrific economy — it’s like a great athlete that’s had a cardiac arrest. It’s flat on the floor, and the paramedics have arrived. And they shouldn’t argue about whether they put the resuscitation equipment a quarter of an inch this way or a quarter of an inch this way, or they shouldn’t start criticizing the patient, because he didn’t have a blood pressure test or something like that. They should do what’s needed right now. And I think they will. I think the Congress will do the right thing. I think that they’ve — you know, they got into certain arguments and they start worrying about assessing blame, and there is a little demagoguery, but in the end, something this important, they’ll do the right thing. So this really is an economic Pearl Harbor. That sounds melodramatic, but I’ve never used that phrase before. And this really is one.

The long and short, doing what feels so “wrong” may be just the answer. Don’t be afraid to take advantage of a market that is largely on sale. After all, if it works for the greatest investor of our time, maybe it will work for us!

Until next time, have a Fantastic Friday!

Chris