Golden Bells Halloween, 2008
Halloween. Scary times.
Sometimes, after hearing stories about evil, frightening things, it's good to go to church and hear a sermon on goodness and light. To be reminded that the good guys win in the end.
This year has brought new ghouls out of the closet. It has not been the same old Frankensteins and Wolfmen. Even the teen slasher movies fall short of the grim tales being told lately.
So, where do we turn for solace, good cheer and, more importantly, truth?
Perhaps the Oracle of Omaha can speak to us about optimism and happier times. Warren Buffett, widely regarded as the best investor in America, wrote an op-ed piece for The New York Times that was published October 17th. Excerpts follow.
October 17, 2008
OP-ED CONTRIBUTOR
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�
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."
Warren E. Buffett is the chief executive of Berkshire Hathaway, a diversified holding company.
It is good to hear from someone who has lived and prospered in many different economic times and not be scared by what he has to say.
Happy Halloween.
VIEW OUR GOLDEN BELLS ARCHIVES
What is Different This Time September 2011
Who is Atlas May 2011
Performance Anxiety February 2011
Ball of Confusion October 2010
Into the Storm June 2010
Year 2009
April 2009
March 2009
Year End 2008
Halloween 2008
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